November 14, 2023 • 1hr 25min

Brad Jacobs - Think Big and Move Fast - [Invest Like the Best, EP.352]

Invest Like the Best with Patrick O'Shaughnessy

Brad Jacobs is a serial entrepreneur who has founded and scaled seven billion-dollar businesses across multiple industries. He is currently the Executive Chairman of XPO, a logistics company he started in 2011. Over his career, Jacobs has completed over 500 M&A transactions and raised $30 billion in capital. In this wide-ranging conversation, Jacobs discusses his strategies for identifying industries to enter, executing M&A, integrating acquisitions, motivating employees, and continuously looking for the next big opportunity. He shares lessons learned from building companies in oil trading, waste management, equipment rental, and logistics.

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Key Takeaways

Brad Jacobs' core business philosophy is "Think big and move fast" - Set ambitious goals and execute quickly
Scalability is crucial - Look for industries large enough to build multi-billion dollar businesses through M&A
Buy companies at lower multiples than your stock trades at to create value through accretive acquisitions
Integration speed is key - Quickly integrate acquisitions onto common systems and processes
Focus on return on invested capital (ROIC) as the key metric for creating shareholder value
Look for industries with consolidation opportunities where you can buy fragmented players and create synergies
Technology should be your ally, not your enemy - Use tech to improve operations and customer experience
Run "electric meetings" with the right people, open debate, and focus on key issues
Motivate employees by tying compensation to performance and giving them opportunities to earn more
Always be looking for the next big opportunity to start and scale a new business

Introduction

Brad Jacobs is a serial entrepreneur who has founded and scaled seven billion-dollar businesses across multiple industries. He is currently the Executive Chairman of XPO, a logistics company he started in 2011. Over his career, Jacobs has completed over 500 M&A transactions and raised $30 billion in capital.

In this wide-ranging conversation, Jacobs discusses his strategies for identifying industries to enter, executing M&A, integrating acquisitions, motivating employees, and continuously looking for the next big opportunity. He shares lessons learned from building companies in oil trading, waste management, equipment rental, and logistics.

Topics Discussed

Identifying Industries and Acquisition Targets (2:11)

Look for scalability - industries large enough to build multi-billion dollar businesses
Focus on fragmented industries with consolidation opportunities
Target companies you can buy at lower multiples than your stock trades at
Return on invested capital (ROIC) is the key metric for value creation
Jacobs: "The only way I know to create huge value is to create a company that five and ten years after you started is much, much larger."

M&A Strategy and Execution (5:07)

Move fast on deals - Jacobs can close acquisitions in as little as 2 weeks
Focus on meeting key people rather than extensive due diligence
Look for sellers with integrity - it reflects on the company culture
Be empathetic to sellers who may be emotionally attached to their business
Jacobs: "I never buy a company if I don't really like the seller because I've seen a correlation between how I feel about that seller and how that deal turns out one, two, three years later."

Post-Acquisition Integration (32:35)

Integrate quickly onto common systems and processes
Aim to make acquired companies indistinguishable from existing operations within months
Listen to employees at all levels for improvement ideas
Look for opportunities to eliminate redundancies and streamline operations
Jacobs: "I want to come in with a very open, receptive mind to say, look, we've just paid millions and millions, in some cases billions of dollars for this business. Obviously, we think it's valuable. And these are the people who are going to make this company work."

Leveraging Technology (48:59)

Technology should be your ally, not your enemy
Ask employees what technology would help them do their jobs better
Prioritize tech investments based on ROI and strategic impact
Use technology to improve operations and customer experience
Jacobs: "I look for industries where there's synergy. As you get bigger, there's economies of scale, there's benefits of size. That as you buy things and get bigger, you just don't get bigger, you get better."

Running Effective Meetings (57:22)

Have the right people in the room - honest, intelligent, hardworking, collaborative
Encourage respectful disagreement and debate of ideas
Let attendees set the agenda by submitting and ranking discussion topics
Focus on key metrics and performance indicators
Jacobs: "If you can create a safe zone for people to lean in and disagree with each other in a nice way, where the person who's being disagreed with doesn't feel bad because you're not attacking that person, you're debating that idea, very different."

Leadership Qualities (1:01:53)

Integrity is critical - be honest and do what you say you'll do
Have self-confidence but also humility
Be hardworking and take pride in doing a good job
Be collaborative and get along well with others
Jacobs on great leaders: "These are people who are honest to the bone. That's critical for leader. You won't get tens of thousands of people to follow you if you're a BS artist."

Motivating Employees (1:05:02)

Pay well for performance - give opportunities to earn more
Tie compensation to executing on the company vision
Create a culture where people can make more than they would elsewhere
Understand that most people work primarily to earn money for themselves and loved ones
Jacobs: "If you can provide them with an opportunity to make a lot more money than they're going to make across the street, but tie it to performance, tie it to them actually executing on the things that will help us materialize our big vision. People will create miracles, people will do things they didn't even know they were capable of doing."

Knowing When to Move On (1:07:37)

Leave when you're no longer 100% committed to the company's direction
Move on if you start to feel even slightly bored as a leader
Ensure you have a good succession plan in place
Be willing to step aside when it's best for the company
Jacobs: "If you feel the slightest bit bored as a leader, it's time to move on. Because if you're doing your job right, you're not going to be bored for 1 second."

Lessons from Past Ventures (1:09:57)

Oil trading (1979-1989): Capitalized on information asymmetry in global markets
Waste management (1989-1997): Consolidated landfills and hauling companies in rural markets
Equipment rental (1997-2007): Shifted industry from ownership to rental model
Logistics (2011-present): Consolidated fragmented trucking and warehousing industries
Jacobs on United Rentals: "We said, that's going to flip. There'll come a point in time where there'll be more equipment rented for short periods of time and utilize over the course of the year by sharing it with many different users, then is owned all year long."

Approach to Life and Business (1:18:45)

Think big and set ambitious goals
Move fast in execution - "things don't get better over time"
Use meditation and thought experiments to gain new perspectives
Focus on what matters and avoid distractions
Always be looking for the next big opportunity
Jacobs: "Life goes by real fast, and you can just dilly dally through it and just die, or you can do real fun stuff and real exciting things, and you can change the world."

Conclusion

Brad Jacobs exemplifies the "think big and move fast" philosophy that has driven his success across multiple industries. His approach centers on identifying scalable opportunities in fragmented industries, executing accretive acquisitions, rapidly integrating companies, leveraging technology, and motivating employees through performance-based compensation. Jacobs emphasizes the importance of integrity, collaboration, and continuous improvement in leadership. His restless entrepreneurial spirit and focus on maximizing return on invested capital have enabled him to repeatedly build multi-billion dollar enterprises. For aspiring business leaders, Jacobs offers a blueprint for dreaming big, executing with discipline, and continuously seeking the next transformative opportunity.