E115: Serial Entrepreneur And Author Jeff Wald Discusses Path To Successful Exits - How2Exit

[00:00:00] Ronald Skelton: Hello and welcome to the How2Exit podcast. Today I'm here with the chairman and co-founder of Multiple Tech Startups. A bestselling author of The End of Jobs, the Rise of On-Demand Workers and Agile Corporations. He's an investor and keynote speaker, Jeff Wald. Thank you for being on the show, man. I was telling you before, man. I don't think I've ever had anybody on this show that's so well-rounded.

[00:00:23] Everything from textile startup, multiple times, successful exits, producer of, music videos and TV films, volunteer or auxiliary police department. You've done a spectrum of things and it's, I'm excited to learn from you today. 

[00:00:37] Jeff Wald: I am super, super glad to be here. And I will tell you, you get one turn in this world. So go out there and live your life. 

[00:00:45] Ronald Skelton: Yeah, this is gonna be fun. So I always like to talk, start with the origin story. Tell us how you got started. It looks like you even cut your teeth at JP Morgan in mergers and acquisitions. You don't have to go back to childhood if you don't want to, but, I always joke around and say, Hey, you were born and then you ended up on a show about mergers and acquisitions. Could you fill out the gap in between? Tell us about you, man. 

[00:01:03] Jeff Wald: I will say this about my childhood, that, I was a unbelievably fortunate to grow up in my family with the support that I had. And I recognize that every day. I get on my knees every night and I pray and I just say thank you for everything I've been given. And I recognize that if I had not been given that start, I may not be where I am today. But I'll also tell you this about my childhood, I was not an entrepreneurial child. I wasn't like, oh, I want to go start a lemonade stand or a snow shoveling business, or things like that. I did take my first job at JP Morgan as an m and a banker.

[00:01:38] I mean, that is as formal and as old school as it gets. I worked, 120 hours a week left at my desk and I loved it. I thought it was the best job in the world, and I thought that's what my career would be just kind of corporate America, marching along, climbing that ladder. And it wasn't until later that, I kind of got this entrepreneurial spirit and start and began starting companies. And I will always say like, I'm not a real entrepreneur. Like, I'm not the guy that's just like, Hey, I gotta take every risk and burn the boats and go like this. I am still that m and a banker.

[00:02:10] I still have models and I create spreadsheets and I am very analytical and in a lot of ways that handicaps me as an entrepreneur. But my roots were not in, where I evolved, except for my family and the support system that I had. 

[00:02:26] Ronald Skelton: It's interesting, it make handicapped you in the effect a lot of entrepreneurs succeed because they didn't know any better. Like they didn't know they shouldn't do something, right? Nobody ever told them it was a bad idea. Where you can analyze things, put it in a spreadsheet, and it may not look good. So you might pick a different path, but as many successful exits as you had and many companies as you co-founded in the cool stuff you've done it.

[00:02:47] I think your chances of winning on the ones you do choose are substantially better because you do have that analytical approach. You do have a look at like, okay, what does the exit look like? You're gonna build the exit, which is something you're constantly trying to teach, other co-founders is, what does that exit look like on this? It's almost a forced conversation to have for most entrepreneurs.

[00:03:09] Jeff Wald: I will say it's a very good point. Look, I am analytical and that is a suboptimality, but at the same time, people make that bet that I'm gonna be thinking through what the different options are, because you're right. Most people would not make an analytical person wouldn't make this leap. They would say, wait a minute, we have a less than 5% chance of success in the best case scenario. Why would I ever do this? I remember as I kind of thought about coming outta retirement, one of the times, a friend of mine said, why would you start another company?

[00:03:40] Why wouldn't you just become CEO of like a series C or D company? Company that's kind of, got tens of millions in revenue already. Cuz you would mathematically get 8% of that. And if you start a company, by the time you get to series C, you are already been diluted down to like, somewhere in that ballpark, maybe 15%. So, but that's higher risk. Why wouldn't you go with a lower risk one? I said, well, because it wouldn't be mine. Why would I do that? So I've lost a little bit of the analytical, and gone more to the hopes and dreams phase, as we call it in startup land. 

[00:04:12] Ronald Skelton: Yeah. Yeah. I, there's a problem in the world that I have to solve phase is what I like to call it. Most entrepreneurs, like they see something and go, you know what? I can fix that. I'm gonna get out there and I'm gonna start turning the gears and get the right people in place and we can fix that problem.

[00:04:24] Jeff Wald: And I will tell you fundamentally, that is what makes America great. Is that people will take that risk. It is almost unique in the world that we have these risk takers, then we have the systems in place to support them and the systems in place to reward them if they succeed. And they know they can keep that money. That is what allows all the innovation. And that is why, one of a hundred reasons why this is the greatest country in the world and we produce what we produce. It is absolutely amazing. And so I certainly hope and pray that we never lose that here in the United States of America. 

[00:05:03] Ronald Skelton: I see a lot of your, startups and all the, a lot of stuff you've, founded, grew, and then exited from are on the tech space. Are you in Silicone Valley or in the, in one of the tech hubs of the world, or where are you located?

[00:05:14] Jeff Wald: I am literally dead center of Manhattan in New York City.

[00:05:19] Ronald Skelton: Which is business sector, but I wouldn't call that a tech hub, at least back when you first started building these. 

[00:05:24] Jeff Wald: You were a hundred percent correct. When I did my first startup in New York, New York was an also Rand Town in regards to technology. This was finance and advertising and a bunch of other industries or, this is the global capital of those things. In tech, it is not, and obviously it is still not, but statistically it is now, I believe second or third in terms of the amount of venture capital that gets allocated to companies.

[00:05:48] New York's come a long way. But that first startup I did in 2006, there was a very, very small ecosystem. And one of the many things I take a lot of pride in is helping to grow that ecosystem in New York City and getting the founders together and talking about our failure, and making sure people knew they weren't alone with those companies. Cuz again, most of these fail and when you face that kind of failure, that huge business public failure, you lose your money, your investor's money. It sucks, man. I've been there. It really sucks. And you need to know that you're not alone, as we all need to know in a lot of ways. But that ecosystem did not really exist in New York City in 2005, 2006.

[00:06:31] Ronald Skelton: Well, kudos for being able to build something in an area where the support's not initially there. I know it, like a lot of people, they relocate to the tech hubs of the world, the San Francisco Bay areas, the Austin areas. Two reasons. It's easier to get tech employees cuz there's, you can steal 'em from the other tech startups. And it's a hub, and the conversation's already there, like, sand Hill is here, right? There's a whole area, a whole district of venture capitalist companies that kind of group together. 

[00:06:59] Jeff Wald: Economically those are, we refer to them, kind of testing off my economics degree as agglomerations. Like things happen more efficiently when a lot of people are there. And so, whether it's engineers or venture capitalists or other founders, you wanna get all those people together. That's how you start the hub. And that's why the hubs become so powerful. And that's not to say that other cities can't and shouldn't try to become hubs, but it takes time to build those things and it takes a dedicated group of people.

[00:07:25] And there are a lot of people that have done a great job, Steve Case, Dan Gilbert, come to mind of kind of building tech hubs in other cities around the United States. And I think that stuff is super important. But once it gets going, it's a very powerful thing. 

[00:07:38] Ronald Skelton: And then, I think as bad as it was, COVID actually had a very positive impact also in the remote workspace. Now, you don't necessarily need to be sitting in San Francisco to work for San Francisco. Now there's some of these guys, Elon's trying to pull everybody back to the office of Twitter. But, that's just his management style and everybody has their own.

[00:07:57] It's either good, bad, right or wrong. It is what it is. If you're gonna work for a guy who wants to, have you in the office, you probably ought to be prepared to go to the office or go find somebody, some other place. So let's talk about kind of the process. You've created multiple companies, grew them, exited them. What does that process look like? As you're building something, how do you know, okay, now it's time to start talking to people. Or it's just people start approaching you at a certain point?

[00:08:21] Or do you kind of have, you're so analytical, you probably have a plan as, Hey, I'm gonna get this to x, right? I'm guessing here, but how do you know when it's time to start having those conversations?

[00:08:30] Jeff Wald: Oh, Ron, you're a good guesser and you're a great interviewer cuz you are, a hundred percent correct. You're leading me right where I wanna, where the conversation should go, which is I have a list, man. The day I start a company, I have a list of who are the potential buyers. Look, I'm not doing that for any reason other than it's super important to always keep one of the thousand eyes you have to have on things. You gotta keep one eye on that endpoint. And you should keep it on there for a host of reasons. It's important to understand, let's say for the last Big X that we have, this company, work market. Work market was enterprise software that enabled companies to organize, manage, and pay their on demand workers.

[00:09:09] So staffing firms were a potential exit point for us. The HR software companies were a potential exit point for us. I didn't think about ADP as a potential exit point for us, even though that is eventually who bought us, which goes to show the lists are kind of dumb because my eventual buyer wasn't even on my list. But it was important for me, that when the head of Corp Dev at Workday came to town. Head of Corp dev at SAP, or Success Factors, their HR platform or Oracle. I need to see them. I need to talk to them. I need to stay on their radar for when they're ready to buy. But I need to understand what they're thinking about.

[00:09:45] I need to read all the news about what's going on in that sector. If no one in my sector ever got bought, why do I think I'm gonna be the first? I'm not saying it won't happen, but you should have a reason. Why you're gonna get bought when no one else did. If the internal groups at those companies are building their own platforms, why would they buy you? Because it's always a build versus buy for them. I need to understand that. I'm not saying I plan everything around that potential exit, but as I go and build these companies, I gotta keep one eye there because that is the end point. We can talk about maybe going public and things like that.

[00:10:18] Nothing I've built has been that big and we've exited for nine figures. But going public is unbelievably rare. The m and a transaction is a massively, massively higher probability. With again, the highest probability, it doesn't work and you go outta business. So you gotta keep that list, you've gotta keep those relationships and you've gotta be in that information flow. Not cuz they're necessarily gonna buy you, but they need, you need to know what they're thinking so that you can plan your business. Because if you're not planning for what that endpoint is, it's not that you're not gonna get there, I would argue you're less likely to get there if you don't know where you're going.

[00:10:56] Ronald Skelton: It's interesting, as I just realized that I have, I've approached people of course, of assets that I want, for my business, and acquisitions and mergers. Only one of them comes back and meets with me, but every other month, at least once a quarter, and just say, he knows he is not ready to sell yet.

[00:11:11] But he's wanting to know what I'm looking. What is he doing that I'm liking? What makes a difference in evaluation as he builds this? Am I still interested? I help reach out and make contacts for him and everything else, because at some point I'd like to see his fold under, I said, let's just work together. I wondered if that happened in your realm where somebody comes and he's like, look, now you're probably not willing to sell yet, but when you are, I want you to consider us, and here's what we're looking for. 

[00:11:35] Jeff Wald: So that happened with us, not with work market, with other companies. A company we exited last year. That buyer had been hanging around the hoop for a year. Right. He knew we had tech that he needed. He always thought that he could build it, but he always knew, if I can't build it, maybe I could just go buy, this company. Eventually we got to a point where financing markets had really started to turn.

[00:11:59] It was becoming more and more difficult. This is the end of 22, to raise capital when you're that early stage. And so the best outcome for both sides, was that he bought us, we became a part of his, his entity. And so, yes, it is a very, very wise thing to do. I just don't see the downside. The only downside you could possibly articulate is the opportunity cost of the time, but I would then argue you're gonna learn so much in that conversation. I can't imagine the downside scenario. 

[00:12:29] Ronald Skelton: Now, you've mentioned a couple of the exits. It sounds like they were both, the ones I've heard of so far were strategic exits. A competitor or somebody in the space that, needed your, your technology, maybe your customers and stuff. They bought you. Have you sold the private equity and anybody's anchor product yet? 

[00:12:45] Jeff Wald: I have not. Cause I've never built a profitable business. Never had cash flow. And so, I think private equity buyers always kind of look at multiples of EBITDA, cash flow and things like that. Everything I've built has been a tech startup. I mean work market, I don't know if I can legally say this, but, I think it's been far enough that I don't think ADP would sue me. I mean, we're losing a million dollars a month at work market.

[00:13:07] Like we were nowhere remotely close to profitability. I don't think I could have gotten to profitability. They're very profitable now within ADP. And ADP's killing it with that product. And it's a great product and any listeners that need software to manage their freelancers call work market. I mean the last exit, scenario, we were nowhere near profitability. But's had a great technology, great customers, and we built a very good thing. We eventually would've gotten to profitability in all of those companies, but that's the bet we make, right? Do we wanna reinvest and keep raising money and build amazing technology and continue to grab land?

[00:13:44] Or do we wanna slow our growth and get to profitability? That's a choice that people have to make. 

[00:13:49] Ronald Skelton: It's something fairly unique to the, tech startup world, right? I've done real estate, I've bought some other companies and stuff. In most realms, if you're not profitable, you don't have anything that's sellable. What you're building in tech is the technology, the tools. It'd be the equivalent of a manufacturer that builds, I don't know, farm equipment of something. They built out a thousand units of it. They all work great. They're functioning. They haven't sold any yet, but then somebody comes by and builds this thing and now they got a thousand units to sell and the technology to build it and how it works.

[00:14:24] But that just doesn't happen in that space. Maybe I just haven't heard of it. It's fairly unique to the tech space that you could build something that is burning cash, and try out and sell it. I think it was Uber I was reading about the other day. They burned so much like, in the tens of billions, if not hundreds, they've told their investors, we don't have a pathway to profitability until, what are they? The autonomous cars are available until we quite happen to pay the drivers. And investors keep putting money in it. 

[00:14:49] Jeff Wald: Yeah. I mean, they have burned through so much cash. It is incredible. But to your point, it is somewhat unique in the tech industry that you can build a piece of technology and sell it for a lot of money even though it's not profitable. The notion being that the margins are so high that at scale it's very difficult to not be profitable. And I think the most famous example of that was Salesforce. Or for a long time, or Amazon, quite frankly. For a long time they weren't profitable.

[00:15:18] And they said, look, we're just building because when we get to this scale, we're gonna be throwing off a huge amount of cash. And that is what happened with both of those companies. And so that certainly is a possibility and could have happened with work markets and scenario and spin back in the companies I exited. It's just, from our standpoint, we want to build as much tech as quickly as possible and grow revenue as quickly as possible and then exit. But here's what's happening in the tech world, which I think is an underreported story. Is that big tech companies and big companies, and ADP, I think should be viewed as a tech company.

[00:15:52] I'm gonna pick on them for a little bit here, but five years ago they really weren't a tech company. They were service company that had some technology. Now I would say they're a technology company that has some services. ADP, five years ago when they bought work market, again, they spent well over a hundred million dollars for work market. They could not have built that platform themselves. They just didn't have the teams, they didn't have the capacity, just couldn't do it. Now they could. So the proliferation of tech scales, the proliferation of open source software, the proliferation of low-code, no-code platforms to build different technology products, has so massively lowered the cost to build.

[00:16:35] Because again, what is our friend that runs m and a and Corp Stratt at ADP thinking, he's thinking buy versus build. Well, when the valuations were getting so ridiculous and people were unicorns, even though they only had 5 million in revenue. And they were valued over a billion dollars, how is a company like ADP gonna reconcile buying that? They won't and they never will. The build also became less and less expensive. So it was always this dynamic of buy versus build. Like they could have eventually built work market, but it would've taken them 10 years and cost them hundreds of millions of dollars. Five years ago. Now it would take them a couple years and way less than a hundred million dollars to build it.

[00:17:19] So now they wouldn't have made that purchase. Because the buy versus build, that dynamic is changing. Now the tech valuations are coming down, but I don't think they're coming as far down as quickly as the build calculation. So that's something for all of your viewers to think about. This buy versus build dynamic in tech, is having a very substantive rebalancing.

[00:17:43] Ronald Skelton: So what was the catalyst of that? I know what the current one is, but it started before this latest phase of AI being able to help you do everything. There was already tools that low code, no code.

[00:17:54] Jeff Wald: This goes a little bit to my research as an author here on the Future of Work. Which you know, came out of being the founder of Work Market, which was a platform helping to evolve the labor force of corporations. The education system always catches up. This is one of the great fundamentals of capitalism. Is their supply and demand, and when there's a supply and demand imbalance, the market responds. And in education, it always takes time. And you see this throughout history. There are skills gaps that evolve and all of a sudden the demand for a job goes up.

[00:18:32] But the number of people that can perform that job is kind of fixed in the immediate term or in the medium term. But over the long term, more people go get that skill and they go to college to get that, or they go to community colleges or, for-profit education companies or coding boot camps. And so, so many people got that skill and we suddenly opened up the ability for people to work anywhere. So it wasn't just a US labor force that suddenly was competing, but I could have my developers in India or Brazil or in the Philippines or wherever I want. And so those two things massively changed the supply and demand balance.

[00:19:09] And so the coding job is always a, has always has been. And we will continue to be a very lucrative field for people. And it's a field with very limited unemployment still, because demand keeps growing, but supply is starting to meet it. And so you have a proliferation of coding skills, which is allowed a company like ADP, which has had about 60,000 employees. Because they were a service company, most of those people were service employees. And I think, a couple years ago, maybe five, 10 years ago, they had 5,000 developers. Now they've got like 15,000 developers. And they have fewer service people because they don't need people answering the phones to say, Hey, how can I help you?

[00:19:51] How can I help you? Cuz their products are better and better. And so that proliferation of coding skills, I think has been the number one driver of that, followed by the nature of the distributed workforce enabling a much, much larger talent pool. 

[00:20:07] Ronald Skelton: I get the, the worldwide workforce and the cost of labor impact in it. When you were telling me the story, I was thinking, wait a second. I graduated in 1990. And in my high school, I actually took basic programming and coding. Back then you could go to vo-tech and I went to a country school. You could drive, half your day, you could go to a technical institute and get a tech degree when you graduate.

[00:20:31] So when I graduated with a, electronics computer repair tech degree in 90. But also the reason I did it is it was a very high paying job and a lot of the small companies couldn't afford, a programmer. So this worldwide, ability to get a, somebody in the Philippines versus here, even some of that out, I think. I remember I got outta the military in 97. I only went in for about five and a half years. When I got outta the military, somebody offered me nearly $60,000 a year to write html. To document, stuff for there. I looked at that and I looked at how easy it was to write, and I thought, this isn't a job that's gonna last six months from now.

[00:21:05] Somebody's gonna create a wizzy wig for this and it's gonna be gone, so I'm gonna do something else. Ended up being a, a computer test engineer for Lockheed. It's gonna change. It evolves. I really think what you, the key thing I heard in there is it's available world wide and that even out the supply demand. 

[00:21:19] Jeff Wald: Well the HTML quite frankly Ron is a great example. Right now you can do two things. You can go and get someone to write HTML for you for like a dollar an hour, in India or someplace else. Or you can go onto Wix or Squarespace and everything is low code and you can build your own stuff. If you want. Like, you don't actually need to know how to code HTML to build your website. They've made it such that you can just do it, just by like, you're making a PowerPoint page.

[00:21:45] Ronald Skelton: So Wiziwig. Yep. So let's talk about other things that have changed at Dynamics and what's changing right now? Because there's a huge shift going. I do the podcast, I have newsletters, I have media stuff. And our landscape is changing as fast as, on a day-to-day basis, right? Six months ago it took us 40 hours probably for, man hours to write all the content and edit everything.

[00:22:08] And we still put the hours in. But instead of putting out two blog posts right now, we're generating 108 pages of content per week with the same number of hours. Because we did augment ai, we did augment, teach the team how to use it to create outlines and stuff. I still make humans read it cuz it's not quite where I want it to be. It did cut down our hours and I can really see in the near future where it's so good. We're really trying to like, okay, now put a unique spin on this, a human element to it because it wrote it better than you would've wrote it anyway. I really want to kind of take a short dive into this future of the, of work as it relates to what's currently going on in the world of AI and these immense advancements that's making.

[00:22:53] Jeff Wald: So I don't want to discount the tremendous advances that have been brought to market. I mean, they existed, quite frankly, to be clear. In companies, in an enterprise software for some time, but there's been no consumer interaction. And the consumer interaction, obviously, as everybody knows is Chat GP T three. GPT four now.

[00:23:13] I'll say this, man, like if we look at history, and this is why I wrote the book. I wrote the book because people have over-indexed reactions to limited data. And I would make the statement, and the reason I wrote the book is that if you wanna make predictions about the future of work, you need to look at the history of work, look at the data, and think about how companies actually engage workers.

[00:23:42] If you look through those three lenses, I'm not saying you suddenly get a crystal ball, you just have a much higher probability of making a thoughtful prediction. So if we were to look at history and recent history, I'm not gonna go back to the industrial revolution, let's go back to the atm, is one of my favorite examples. The ATM came out, September 2nd, 1969, was the first ATM that appeared. Rockville Center, New York, Citibank. It took 25 years for the ATM to get perfected and proliferate. 25 years. Wasn't until 1995 that the ATM appeared in every bank branch in the United States of America. And what did people predict about the 500,000 people employed at the time as bank tellers?

[00:24:29] Ron, what do you think the big prediction was of the bank teller employment, 20 years forward? 25 years forward?

[00:24:35] Ronald Skelton: They're all gonna lose their job.

[00:24:36] Jeff Wald: A hundred percent. That's what everybody said. Oh my God, there'll be no more bank tellers. What are we gonna do? In 2020, just before the pandemic? How many bank tellers do you think were employed in the United States of America? There was a 20% increase in the number of bank tellers. And for those of us that study the history, the data, and how companies engage workers, that's not a surprise, but let's just unpack it for a second.

[00:25:03] The ATM did impact the bank teller job in just the way we would've thought it did. When we look at job losses, we have to look at what is the new technology that's coming in and which of the specific functions within that job. Cause every job is made up of a series of functions, are automatable, are repeatable, high volume tasks for the bank teller. The repeatable high volume task is, I wanna withdraw some money. I want it in twenties and fives. Well, that's over and over. Maybe it's tens and ones like. But it's the same task over and over and over again. That task can be done by a machine. And it frees up the human to do the more high value added task. 

[00:25:44] Back to our makeup of a job, if the functions within that job, less than 50% of them are the repeatable high volume tasks, we tend to see no job losses. None. It is just repurposing a high skill. Once you get over 50%, we start to see job losses, and they start to move mathematically, 60% yields about 50% job loss. 70%, 60, and then blah, blah, blah, blah. It almost never gets to a hundred percent by the way. And so with bank tellers, if we look at the breakdown, the functions of what the bank teller does, about little over 50, 55% of their functions were repetitive high volume tasks. 

[00:26:20] So we would expect somewhere around 50%, maybe a little under job losses. And that is actually what happened. The average number of tellers per branch dropped from 21 to 13. But the number of bank branches in the United States more than doubled. And so you have to think about the regulatory environment because it was the repeal of glass stegel. Some of the glass stegel provisions that allowed more competition in banks. All of a sudden here in Manhattan, I get a Chase in a city bank in a Wells Fargo on every freaking corner. I didn't have that before.

[00:26:54] I need to think about the customer service interactions. If I walk into Citibank and all there is to greet me is a wall of ATMs, but I walk into Chase and they gimme a lollipop and they say, oh, Jeff Wald, how are you today? It's so great to see you but, where am I gonna go back to? I'm gonna go to Chase. I love lollipops. So like, there are a ton of variables in this equation. Not just, oh, this tech exists, therefore that job goes and that is the base human reaction and it's almost always incorrect. 

[00:27:22] Ronald Skelton: You'd almost wonder if the psychology of, well what happened in the ATM world was our, it fueled our psychology of instant gratification. So therefore we don't wanna drive 10 miles and wait in a line of 15 people. We wanna branch right here cuz we need to do this right here, right now. It's possible that, the whole invention of the ATM and it fueled the, wait a second. I love this instant gratification thing. Where's my local branch? I don't want to go across town and wait 25 minutes in my line. 

[00:27:49] Jeff Wald: And how is mobile banking impacting that? We need to look at all the technologies and we need to think about what are the CEOs of these companies thinking about their customer service interactions, about the competitive dynamic, about the regulatory environment, consumer behavior. There are so many things that go into this. And so you're a hundred percent right. But my main message in the book is any simple explanation, belays, the mass complexity, that goes into labor resource planning. So I'm not saying it's not gonna happen. I'm not gonna say ChatGpt isn't gonna take the job of every author.

[00:28:24] I will say that it won't take the job of every author in the world. That's not gonna happen. I will say, if we look at history, it just seems unlikely in the medium term. When you look out 40 or 50 years, all bets are off. Like certainly jobs do completely go away over time. It just takes a very long time for that to happen. Are things more compressed now than they were 50 years ago? Of course things happen much quicker, but do not expect jobs to massively disappear in the next five to 10 years. It will not happen. 

[00:28:55] Ronald Skelton: I got it. I mean, the other side of this is, it actually acts as a catalyst, right? We are able to generate more content, more valuable content. And at this stage I still have to have people, you have to have a really good BS meter to use ChatGPT for content because, it's like having a five year old or like having a high schooler write for you. He's gotta turn the paper in by Friday.

[00:29:22] He's gonna turn it in and if he doesn't know it, he's gonna make some stuff up. These tools are still doing it. Their language engines, not logic engines and the fact that they don't fact check themselves very much and I've actually had it really give me some blatantly wrong stuff. I was looking for people to interview. I said, give me 10, 10 books on mergers and acquisitions. They gave me 10. I was like, I already interviewed X, Y, Z. Gimme 10 more. And it listed 10 books. And I was like, wait a second. I know three of these guys, I didn't know they wrote a books.

[00:29:45] I called em. I said, Hey man, when did you write the book about X, Y, Z? Like, I never wrote a book. It made up a title. It just made stuff up.

[00:29:53] Jeff Wald: Yeah. Those models are being trained on the internet. That's their training ground. And so if we wanna find a place that's replete with false information, let me just give you a website. There is still a role for content moderation and for the editor's desk and for going through a process to make sure you source check and fact check. And we need more of it in this country right now, not less. We need to understand the actual facts of the matter. 

[00:30:20] Ronald Skelton: I have a friend who's a, I would call him a junior to mid programmer, and he called me cuz he knows I'm really focused on the AI stuff and I'm really into it. It's fun for me. He called me as a mid programming level, and he's like, Hey, is my job going away?

[00:30:32] I was like, never. You're gonna get better at your job. It's gonna help you. I think AI, at least in the current state, it's really good at knowing what's been done before and saying, Hey, this is the best way it's been done before. But as far as you, if you find new problems to solve and you're trying to create new things, I think there's always gonna be an opportunity to create new things and write code that hasn't been seen before.

[00:30:55] And he says, what about this? He even brought up this, what is it, AGI, which is general intelligence. I was like, I think that's a lot more complex than people. You're way, way ahead in me, in the tech world. So I'm just kind of, my gut is that's a lot more advanced than a lot of people are giving it credit. Meaning, I don't think we're gonna be there as fast as people think we are.

[00:31:13] Jeff Wald: Things never get adopted to a point where they're destroying jobs as fast as people think they are. As an example, I'll do one other example if that's okay. If I were to say to you, well, not you, cuz you know, you and I have had this conversation. If I said to the person on the street, Hey, should someone go into being a truck driver as a profession. Their answer is gonna be, oh my gosh, no. Autonomous trucks are coming and they're, though that job won't exist.

[00:31:38] There is a world in which that job doesn't exist, but that is not a world that exists in the next 20 to 30 years. The notion of autonomous vehicles has been around for almost a decade. The idea that a car can do it is still a fallacy. They still can't do it. And even when the car gets perfected, which I'll take a bet. I'll take the over on a five year bet for anybody that wants to make that bet. A truck is much more complicated. Because a truck has a huge amount of cargo behind it. Now you need to factor in every different cargo amount and how it impacts braking and all the turns and all these other things. So it's massively, massively more complex. But even when the tech gets perfected, then all of the other infrastructure needs to be developed.

[00:32:19] How do you repair that truck? How do you charge it? Assuming it's electric. What happens if something, if it hits something? What happens if the cargo gets stolen? Like there are a bunch of regulatory issues that need to be ironed out, and our politicians are incapable of even having civil discourse, let alone coming up with thoughtful solutions to new technologies. So that's at least another 10 years before you get that stuff done and all the charging stations and monitors and blah. And then, by the way, the trucking companies need to buy the trucks. And if we looked at Knight Swift, the largest trucking company in the United States, they have 18,000 trucks. If they dedicated two x what their annual CapEx has been.

[00:32:59] To truck replacement, it would take them 15 years to replace all their trucks. And by the way, they're not gonna do that. They're gonna go slowly and steadily and then maybe they'll go a lot quicker. Right? So 15 years was the best case scenario. It's not gonna happen in 15 years. So you start thinking about five to 10 years for the tech, another five to 10 years for the infrastructure and all the regulations.

[00:33:23] And then the trucking companies have gotta do it. And they have to make the decision to do it, which will take 'em a couple years. You're talking about 30 years. The story about truck drivers in the United States of America right now, is where a couple hundred thousand short of what is a very good middle class job. That's the story. And yet people fear monger and they go, oh my gosh, autonomous vehicles. No, no trucking jobs. No, that's not happening in the near term. 

[00:33:47] Ronald Skelton: If you wanna look a little further back, if you look at when semis actually were, starting to really become used, even back in the logging days, it's the end of the railways, right? The railways are gonna be obsolete. And there's still railways, right? There's fewer of them, but, there's still railways. We still use it and now we're looking at like, well maybe there should have been more railways to go into different ways cuz it's, semi efficient. Especially, high speed ones and other stuff.

[00:34:10] So I get it. The technology is not nearly as disruptive as the headlines are gonna say they are. So let's go back into the mergers and acquisitions world. We've had our little rabbit hole down that. And it's a fascinating one and a lot of people are concerned about it. So it was worth a dive down into that. But let's circle back around. You've been through some exits and stuff. What did you learn along the way? I'm sure the second one was different than the first one, the third one. And at certain point you go, okay, I've got this down. I know to look for X, Y, and Z in an acquirer. Somebody I would be willing to work with, I know to accept.

[00:34:45] You were telling me a story before we started about somebody as far as strong on the line in this end. Okay, tomorrow you're an employee. Let's talk about setting up our entrepreneurs out there, looking at exiting, looking at that strategic purchaser. What should they expect? What should they do? And then we'll talk about the day after and here in a minute. 

[00:35:04] Jeff Wald: So I think you have to be, and this was, as you alluded to in, in our pre-show conversation, you have to be comfortable with what you get day one. And the notion of whether it's a contingent payment or your equity in the continuing business. I literally at this point tell friends, and not that I've gotten burned by this yet, there's still some contingent payments out there. 

[00:35:29] If you are not happy with what you get in your pocket, day one, don't do the deal. Do not count on, because your point of maximum leverage is the moment before you sign that document. Once you sign it, that's it. Right? Like you are now just an employee. You may be a shareholder, you might have a senior title. But the number of times that we have seen friends kind of have suboptimal outcomes when they were counting on what was gonna happen day two, two years from now, one year, whatever it was, you don't have control over those outcomes.

[00:36:03] And I'm not saying that people are there trying to screw each other, they're not. And obviously there are legal agreements and this and that. But you have limited control. And if you're, your ultimate control is, well, I'll sue them, if they don't pay, that might be their business model by the way. They may just wait for people to sue them and then they settle for a lesser amount. Like, just don't count on it and you never, look whenever lawsuits start getting fired, the only people making money are the lawyers. 

[00:36:29] Ronald Skelton: That's what I was gonna say. I've been in a couple, if you're in real estate, you're eventually gonna get into one. The only person that's ever gonna make a dollar is the attorney. 

[00:36:36] Jeff Wald: It's just, look, I get it, some people do some shady stuff and that is, that is one of the cornerstones of the American system is property rights and their enforcement through our courts. But if you're suing somebody and that's your recourses, like just. I'm not saying don't, cuz you know, obviously you have every right to do and you should do what, you should defend your rights, but that's not a good outcome. That's just not a good outcome. So be happy with what you get day one. And if you're not happy, don't do the deal. 

[00:37:06] Ronald Skelton: That's a great statement. If you, before you sign the document, make sure you're happy with everything, all the terms and stuff. Don't expect anything to change after the document. I have actually seen cases where, somebody will say, oh, we can change that later. Like even in the real estate world, we can fix that later. Just sign this right now. We gotta move forward. Not sign anything until we get it worded right. Because it doesn't change even in the real estate world, even in small business, even in tech, in the big tech world.

[00:37:32] What the document it is, what the document is and, it may or may not honor that. They will change that later and most likely not. We're at the point where we built a company. We found, our suitor. Somebody that we'd like to work with in the future. We've ready to sign the document. Most cases nowadays, there's some form of golden handcuffs. There's like a, they want the founders to stay, they want the team to stay cuz they got stuff for them to do. What do you do on day one? This is a conversation that you and I started to have earlier before we turn on the mic and I said, Hey, let's turn on the mic before we do this.

[00:38:06] Day one, you've got your check, right? You just said make sure you're happy before you sign it. You sign that, you wake up the next morning. You look in your in account and, six figure, seven figure eight figures just got wired into your account. What does that do to you emotionally and how do you go to work that next day?

[00:38:21] Jeff Wald: Well, I'll start with this. I'll talk about examples here. I sat down with Carlos Rodriguez, who was the CEO of ADP at the time, and we're a lovely person you will never meet. I mean, just an amazing, amazing dude. And we sat down maybe a week before the deal was done and he said, I would love for you to stay for four years after the deal.

[00:38:38] I was like, are you outside of your mind? No, I will stay for two, two is standard. He said, well, gimme two and a half. I was like, okay. And so we shook hands. He said, I'll go get the lawyers. I'm like, you don't need lawyers. I just shook your hand. Come hell or high water, I'll be here. I'm obviously a man of my word and I stayed there for two and a half years. Two and a half years, and a day came and I left, with full transparency to the team there. So no worries. But it did set up that time that I was gonna be there and we'd agreed on what my role was gonna be. I would run the entity and I committed to him that I would run it as if he didn't buy me.

[00:39:13] So I was gonna put in the same number of hours, not go on vacation, which I hadn't done for seven years. And I was gonna go all in. And then the second year into year and a half, one of the ADP execs, brilliant guy named Yenz Denar, I was gonna take over and I would be there to shadow him and help anywhere I could. Mostly sales and things like that. And that's exactly what we did. They are people of their word. They're amazing. But I was less concerned about me than I was the team. So day one, the president of ADP comes to our office and they brought like 50 AV people cuz they were broadcasting it to ADP offices all over the world. To our offices.

[00:39:52] We had three other offices around the country and one in Canada. And Doug and I did a little town hall and talked about the deal. And it was, I then at one point, I could feel the room. They were like, ADP? Why are we gonna go work at ADP? And certainly then, and even now, ADP does not get the credit it deserves for the amazing company that it is. And I could feel that they were, so I stood up and I said, you know what? Let me say something. I know what's going through all of your minds right now. Two things. One, you all just got paid cuz everybody was an equity holder. And my company's always has been, always will. You all just got a check, right?

[00:40:35] Just got wired to your bank accounts and you had a lottery ticket that you came to work here for and a lottery ticket just got cashed. And you're thinking, now I just have a job. And I have a job at a company called ADP that I never really thought of as a tech company and most of my employees were obviously tech. And two, I know that every single one of your inboxes are filled right now with recruiters calls. Cuz that's what recruiters do, right? Company gets bought big tech and they know a lot of people are gonna jump ship. And I said, and I know your instinct is to leave because you don't wanna work for ADP. To which Doug was like, what are you saying? I'm like, Doug, I'm gonna land this plane. Don't worry about it. He was not happy that I was saying, you don't wanna work for ADP.

[00:41:18] I said, so I know your instinct is to leave cuz you don't wanna work for ADP. And I know your instinct is to go and get another lottery ticket cuz your lottery ticket just got cashed. And I said, and that would be a mistake. And here's why. We just got bought by, sure, one of the largest companies in the world. And yeah, they're bureaucratic and they move slower than we do. But I'll tell you this, they know what they're doing and they do it at a scale that is literally a thousand times bigger than what we do. 3000 times to be more specific. And so if you leave today, you'll deprive yourself of watching as ADP teams come in and fix, everything that we built, and I used the word fixed deliberately. Startups would build things with bubblegum and duct tape. We're trying to get 'em out. 

[00:42:04] If I were you, I would stay here for at least two years and I would learn everything you can about fixing all the things we did as mistakes. And then I'd think about leaving. Because if you came in to interview with me and you say, yeah, I built something and then I watched as one of the largest, most well run companies on the planet, fixed all my stuff, and then I am leaving and I wanna come back to square zero and build it again, I'm gonna go, oh my gosh, I need to have you.

[00:42:30] That's the perfect employee. Perfect team member for a journey. And I will tell you, our attrition rates were lower post-acquisition they were before. We lost very few people. And so it was awesome. And I'll finish in my response to your question with this. Look for me, it was a lot, it's a lot of money. And I was blessed with a lot of very good advice from tax council and legal counsel, and it was great. But the biggest change personally for me was the stress of going into that office, not thinking about, shoot in two more months I may not be able to make payroll. And I have to go raise more money. And what if my investors aren't supportive anymore?

[00:43:13] And what if a customer leaves and then they lose faith? And that's the stress we live with, every day as the founder of these companies, the CEOs of these companies. Again, as we talked about, work market burned a million dollars a month. So like I knew how much money was in the bank, and I knew how much runway we had. What if the New York Times left us? What if KP MG left us as customers? My investors were like, Ooh, I'm not sure this is good. And they don't put more money and then I'm done. Cash is oxygen. And when you run out, you're gone. And now that ADP was there, it was like, ugh.

[00:43:43] Like, you know what? Now we can just run a business and one of the largest companies in the world is, and by the way, the world's largest payroll company is handling our payroll. The stress relief from that. So look Ron, I still ran that company as hard as I could, and drove it as hard as I could, I think did great for ADP. But it was a very different kind of work because I wasn't sitting there freaking out that the company may not make it one day.

[00:44:12] Ronald Skelton: Was there a customer base alignment? Like, I knew you guys did the freelance stuff, but did, a large portion of ADP's payroll customers have freelancers that they didn't have a solution for and that's why they acquired you? 

[00:44:23] Jeff Wald: Absolutely correct. Yes. 

[00:44:24] Ronald Skelton: So overnight you're getting, you've got all of ADP sales guys going, look, here's what else I have to sell. How fast did it scale? Like you went from how many, I dunno if you can even tell me, but stop me if you can't. But it went from X number of users to like.

[00:44:38] Jeff Wald: That I know I'm not allowed to say. That is, ADP does not break it out in their financial statements. And so I certainly can't. But I'll say this, we grew much quicker. But here's one suboptimality that I think everybody glosses over in doing m and a. Let's dive into this. The thesis was, oh, we've got 8,000 sales reps. Jeff's got eight sales reps. We'll be able to sell the heck out of it. No, it's not that simple.

[00:45:06] Activating the Salesforce, even though ADP owned us was super difficult. Work market is a complicated product. It is difficult to get somebody trained up to sell it. It is difficult to understand cuz every company in the world doesn't use freelancers, and there's no way to figure out who does. So it was a complicated product. It's a complicated sales cycle. It's a complicated implementation cycle. It's a great product once it's in, but it's, it takes us a while to get it in. And ADP reps, they know the HR department backwards and forwards. Freelancers aren't managed in the HR department, it's a different department. So they didn't have the relationships.

[00:45:44] So if you're an ADP sales rep and you can just crush it every day, selling payroll, selling HR software, selling some quick add-ons, and suddenly you get this thing and you're like, oh, freelance matter. I'll do this. And then someone goes, no, no, no, that's not it. And you go, oh, you know what? I don't understand it, forget it. That's what they did. They said, forget it. I don't wanna deal with it. 

[00:46:03] Ronald Skelton: Didn't even click on my head. I was an IT director and director of operations for some big tech companies back when I worked for other people. And I always had a big section of my budget for freelance work. And because the HR could tell me that we have a hiring freeze and I need, I still need stuff done.

[00:46:18] If I have it in my budget, I could bring somebody in for three weeks and get a project done. And it never re went through them. Like, half the time they didn't even know. I was friends with one of the, HR ladies. She come over and go, who are these free people here? I've never met 'em before. They've never been through orientation. I was like, yeah, they're contractors will be gone in two weeks. Two months later, she comes back, why are they still here? I was like, they're really good. I have other projects for them. Now I see the disconnect and in my mind I thought, you just got a thousand salespeople.

[00:46:40] Jeff Wald: We ended up getting a few. There were a few of them that really got it and that had the right customer base for it. Cuz again, not every company is managing freelancers at scale. Almost every single company uses freelancers, but in order to use work market, you have to be utilizing freelancers at scale such that our software can bring the efficiency and compliance that you need. If you're just using 10 or 15, spreadsheet's fine. Don't worry about it. 

[00:47:04] Ronald Skelton: So, let's take to the next step. What happens when you hit that? Like you're starting to get close to your time, right? You promised two years, two and a half years. Two and a half years, comes up. What is the phase out process? How do you leave the company? Do you start telling people or reminding people that, okay, it's two and a half years, three weeks from now I'm going. Or is it two months from now, how far back do you start prepping people and start backing out? 

[00:47:26] Jeff Wald: I literally, the day of that acquisition with Doug said, my last day here will be September 30th, 2020. Like that is when I'm staying until. And that is like, I was very clear with literally every person at ADP. There was nobody that did not know the day at which I was going to walk out the door. Look, I was fortunate that, and far be it for me to say this, that we had covid. 

[00:47:52] Because if it wasn't covid, I would've been in that office like walking out the last day with like my box being like, bye bye. And I honestly, Ron, I would've been in full tears. It would've been an absolute mess. I would've been bawling. I would've been so sad. So many emotions, so many things going on. Instead, what happened was that September 30th, the last meeting, everyone's like, all right. And I was like, all right guys, I'll see you. Yeah. I mean, I'll, we'll talk whatever. And I closed that laptop, put it into a box, shipped it back to ADP, opened a different laptop, and just went right back to doing stuff. Like, clearly that last six months, because it was Covid, I turned more into like a cheerleader and, just trying to make sure everybody was okay in what was a very, very difficult time.

[00:48:38] And all of my operational responsibilities were gone at that point. I didn't own p and l, I didn't have any direct reports. Like, I could just kind of do whatever. And so, I was there really to just keep the team together and to make sure the customers were okay. Like, I was on the phone with clients all the time. So the clients all knew that I was leaving and had, they had all been transitioned appropriately, blah, blah, blah. So like, it was easy, but it had been very projected. But the emotion of it was going to be the difficult part. And this is a weird sentence to say, but thankfully we had covid, so I didn't have to go through that emotional goodbye. I mean, I still had some emotion closing the laptop and that night just kind of going, wow, I don't work for ADP anymore.

[00:49:23] I don't work for work market anymore. This is weird. If I had to walk out of that office, dude, that would not have been pretty. 

[00:49:30] Ronald Skelton: As human beings, we tie a large portion of our identity to who we work for or what we do. If I walk up to a stranger on the street and say, Hey, my name's Ron, who are you? They'll tell me their name and what they do. 99% of the time somebody go, I'm Joe, I'm a carpenter. If I introduce myself and say, what's your name? What do you know? I don't even say, what do you do? Like, who are you? And the who are you is their identity's tied to what they do.

[00:49:51] I think a lot of the, you've done this multiple times. You've created something, bought it, or you've built something, sold it, and then put a different hat on. Do you ever just get acclimated to that? Okay, my part of my identity goes away and I gotta put on a new hat? Or is it just, is there still a sting to every one of them? 

[00:50:10] Jeff Wald: I would say there's a little sting to every one of 'em. Look, I will tell you, the bigger sting in the hat changing is putting on the work hat again. I've been in this role as chairman of six different companies that I've helped co-found, over the last two years. I am gearing up right now to do another HR tech startup, where I will be the CEO again. And so I won't pretend that I'm not afraid about it. Being the chairman where other people are running it. If it fails, I'd be like, well, they were the ones doing it. I came up with the idea and helped fund it, but they took it and if it worked, great, whatever.

[00:50:47] When I take the reins again, it's on me. Like that's not fair to my other team members and all the advisors and other people that are there to help, but at the end of the day, it's on the founder and the ceo. And so I have anxiety about that, or anxiety's not the right word, fear. I have some fear about that. And I have some fear about, getting back in the saddle and going that hard. And the fear is not, Hey, I'm gonna work 18 hours a day again. That's not the fear. I'm not afraid of that. My fear is that I'll work at 18 hours a day again, even though I don't really, I know I don't need to. And my life is different now. I'm getting married, like, we're gonna have a family and I don't wanna lose myself and work, which is what I did before.

[00:51:31] And so putting that hat back on to get back in, to build another company to sell it. Clearly the goal. Knowing that my life is different and knowing my tendency to kind of go all in, there's fear there as well. And I've had a lot of conversations with my future wife about this, that, I need to be mindful that my life is different and I can't just say whatever, I'll work until three in the morning and just get it done every day. I can do that every now and again. But I have other obligations that I need to be mindful of. 

[00:52:01] Ronald Skelton: Yeah. I've got a six year old, or I guess she's seven and a 12 year old now. So I have a seven year old and a 12 year old. And I never really knew my father. I didn't get to know him too well until I was old enough to work for him. Cuz he was always at work. He was always gone. I made the commitment that when we decided to have kids that I'm just not doing that. I haven't missed it. My, my son's playing basketball game. I take him to every practice. I don't intend on missing a game.

[00:52:23] The point I'm making is it does change a world. Being in relationships. I came from the IT world where it was 60, 80, 90 hour weeks every week. It was absolutely expected of you. And that's one of the reasons when we moved back to California is my wife's like, are you gonna go back to IT? Like, no, I've got kids. There's just no way I'm gonna put myself on call and tell my kid I can't go to a basketball game. Cause we have an outage, right?

[00:52:43] Just, I don't wanna be in that world. So I get it. Kudos to you for acknowledging that there's a change there and keeping your mind on it as you build what you're gonna build next and making space for both.

[00:52:54] Jeff Wald: Well, trying to. We'll see how well I do. All we can do is do our best and communicate with our loved ones and our team members. I am sure make a ton of mistakes. 

[00:53:04] Ronald Skelton: It all starts with intention. Set the intention and then see where it goes. So we're at the hour. I've asked you a lot of questions. Is there anything I should have asked? Did we miss something? 

[00:53:13] Jeff Wald: No man, this was super fun. I obviously love talking about the book and the future of work. And I love talking about startups in this process of getting going and building and then exiting. Cuz we're not building for our health. Building it to sell it.

[00:53:28] Ronald Skelton: And I always ask if somebody could only remember two or three things from today's show, what would you want them to remember? 

[00:53:34] Jeff Wald: I would want them to remember our conversations around the future of work. And specifically whenever you hear a simple explanation, this new tech exists, all these jobs are gonna go. It is almost always wrong. And just to be thoughtful and to kind of uncover and quite frankly we should do that in all of our things. Don't just any simple explanation, almost anything is almost always wrong.

[00:53:58] Think, look at the history, look at the data, look at how companies actually engage workers, and you might have a better chance of having an a accurate answer. 

[00:54:07] Ronald Skelton: And if somebody wants to work, with you, reach out to you, pitch an idea, I don't know. What's the best way you want people to reach out and contact you?

[00:54:14] Jeff Wald: Well, I'll tell you this, in 1998, I bought jeffwald.com. And, for a solid 23 years or so, it sat, at dormant, with me just paying, GoDaddy $20 a year. But right now we have actually put something up. Jeffwald.com is there, all my companies are listed, all my books and different talks that I've done. We'll certainly have this, conversation up on there as soon as it's released. And there's a Contact us forum and you can certainly get in touch with me and my team. 

[00:54:43] Ronald Skelton: All right. I appreciate you. That's the show guys.