speaker-0: Welcome to exit algorithms, the podcast where we decode what it really takes to unlock growth, streamline operations and prepare your business for a high value exit. I'm your host, Pete Vera. And today I'm excited to bring on Dr. Adam Link as my guest. He's a certified financial planner with a doctorate in computer science, former senior engineering manager at Coinbase and the founder of Fireweed Capital. ⁓ Yeah, have a list of things impressive about your resume here. But thank you so much for joining us today.
speaker-1: Thanks for having me. Looking forward to being here.
speaker-0: Yeah, can you start off and share with for listeners your background? I read you you you exited three companies and a fourth one what you you did with the IPO route. I loved and you're you know, now just investing investing. You have a big portfolio. I'd to hear how you got started in business and yes, your journey.
speaker-1: Yeah, that's a great question. Yes, I guess we'll kind of go back to college, So I got my undergrad in finance. And like you mentioned, I've got a doctorate computer science. ⁓ I learned best formal education. So I basically just like picked up certifications and degrees along the way. But really got my start in finance. I happen to like capital markets finance. So there's really two routes that you can go and finance. One is corporate finance, where you're basically working inside of the company, working in net present value analysis and stuff like that. And then capital markets finance, which is much more stocks and bonds and what happens every day on Wall Street. So I like the capital market side. That actually led me into a brief stint in investment banking. For those of who don't know what investment banking is, if you are scaling a company and readying it for sale, investment bankers are who you're going to talk to most likely. Investment bankers are basically real estate agents, but for businesses. So you sell a business you don't own to a buyer and you make a commission off of it much the same way a real estate agent sells a house. yeah, worked in investment banking for a little bit and actually left investment banking for my first startup that we ended up selling. My first time at the exit table was kind of luckily there that I had had a background in investment banking. ⁓ Seen some deals go through, been a part of a few deal teams. So I knew enough to ⁓ sit on the other side of an exit table and kind of negotiate some terms. And then that was really my foray into tech. We sold the company. I got kind of on in the acquiring company and they wanted to build a mobile app kind of lab around myself and some other companies that they were acquiring. moved into tech at that point and then spent, ⁓ gosh, probably more than a decade in tech. And was in tech between, know, founding companies and selling them, eventually working Coinbase ⁓ during the You know, spent a lot of time in crypto, about nine years in crypto as well. So yeah, really, you know, did a lot of tech and kind of throughout all of that was always the person that ended up answering finance questions. With my background in capital markets finance, I was always the person that ended up talking, well, you should do with retirement. Here's how you should think about, you know, stocks and bonds and investments. A couple of years ago, I decided I should get paid for this. And so I went and became a licensed financial advisor and ⁓ just you know, friends and family members to begin with. And then that really turned into what Firewood is today, ⁓ which is financial advisory firm focused on tech individuals and tech families. basically like myself.
speaker-0: Yeah, gotcha. Yeah, it makes perfect sense. You've been on all sides of the transaction there. In-house experience. ⁓ Yeah, I'd love to dive in a little bit on the specifics of your exits. Yeah, did you learn anything? Is there anything you would have done different? ⁓ imagine the second and third were probably a little more smooth.
speaker-1: Exactly, yep. Yes. ⁓ man. Yeah. exit you learn a little bit more. So the first exit that we did was a mobile app that my friend and I had built. And we a company reach out to us and say, you we want to acquire the app, ⁓ bring you on. ⁓ And, like said, kind of build a mobile app studio ⁓ around us. you know, that was... ⁓ That was my first exit where I really got to look at the deal terms and negotiate them. Right. So I had seen previous exits, you know, in the hundreds of millions of dollars range and you know, there's earn out clauses and there's lawyers that get involved and there's this whole official process you do. And so I kind of came to it with that view of like, well, there's going to be a whole bunch of clauses and really there wasn't, it was a pretty simple term sheet what the acquiring company was looking for really was could we prove out the value in the mobile app? and really show that there is a future business there. And what we ended up doing was basically trying to meet the metrics that they put in front of us and them in any way possible. And so, fun lesson learned in that one was we spent a lot of time and effort to try to meet the metrics through any means possible. And what we found out after meeting the metrics through any means possible was what we had interpreted the agreement to mean, which was certain numbers had to be hit to get an additional earn out. The acquiring company had a very different view, which was certain numbers had to be hit a certain way to show sustainability of the business.
speaker-0: Mmm.
speaker-1: And it was a very interesting kind of second phase of the negotiation because what they basically said is, look, you guys, took any means possible to meet those numbers. And what we wanted was to prove out the viability of the long-term value that we were going to acquire. And so basically we this mismatch between ⁓ us being short-term incentivized to kind of get these numbers up to what they wanted to see and them having a long-term view. that's really where, I for me, I learned he who has the gold makes the rules. That's the golden rule of business. what we basically ended up with from the acquiring company was a decision ⁓ well, do you fight for this earn out, which was ⁓ portion of money, but not a ton, or do you stick around ⁓ kind of continue to build their And my and I chose, my co-founder and I chose different routes. He left, I stayed. He basically said, no, I want that earn up money. And they didn't agree to the terms that we had on paper. And I said, I want that earn up money too, but I also get their point of view. And I'd rather stick around and grow and build this new company. that was kind of one of the first things I learned. Is that what you have written down, what you end up with when the check has ⁓ the bank are two different things. Wow. Fun couple weeks of very heated phone calls back and forth, right?
speaker-0: ⁓ my gosh
speaker-1: Yeah, so that was the first thing. Make sure everyone at the table understands the goal you're aiming for, right? And so, you know, some subsequent earn outs, exits, I should say, you that there were earn outs. ⁓ basically, you know, same thing, you know, hit certain numbers, get to certain metrics to show viability and, you know, get an additional payout. And went in with my eyes open in the next couple of times because I basically got to say, hey, you know, look, there was one that I knew there was an earn out clause in there and I knew it was going to be unlikely we were going to hit it. And so when we sold that company, I basically said, I'm going to take that value of the contract and remove that in my mental math. And I'm going to basically negotiate as if I'm not going to get an earn out. And I was right. We didn't get that earn out. The targets were too aggressive. ⁓ so we basically said, OK, well, let's negotiate everything else but that earn out and just kind of let them have that, give them a win. And we'll to negotiate. everything else. So we get the best possible deal we can knowing that we're probably not going to hit the iron out and hey, it's gravy if we do.
speaker-0: Gotcha. Yeah, that's awesome. You learned from the first time.
speaker-1: Exactly. Yep.
speaker-0: Yeah, did you have a business broker or investment bank you in the sale process?
speaker-1: You know, I actually didn't. None of the exits, we used a ⁓ investment bank for that. I have worked with investment banks. There was a capital raise we did for another business that business, know, like any good entrepreneur, there's always more failures and successes. So that particular business ended up failing. But yeah, we were using an investment bank to try to raise some debt, basically to expand the business. ⁓ And just was... ⁓ was around like the 2014 era and just the macroeconomic cycle was not good. And so we did not get anyone really biting to give us debt, which was a unique and interesting experience. know, like, again, working for investment banks, you know, there's a very deep bench of folks that that bank knows and they talk to. And so being on the other side as a company then having an investment bank go out to the market and come back with no one wants what you're selling. That was like, oh, So you can fail, you can fail the race capital, right? And there's so much from the viewers out there that say, well, yeah, of course you can the race capital. I've failed the race capital, right? But for me, that was really the first time that like, we went out there to raise and we had, know, an A team and nobody wanted it. So it's kind of like, well, if nobody wants to give us debt to expand the company, we might as well wrap it up. You know, so we did, we just wrapped up that company and said, well, it's not worth really pursuing the... pursuing that concept any further, know, just take a loss.
speaker-0: Gotcha. Yeah, no one to pivot.
speaker-1: Exactly. Yep. No one to pivot and no one to call your CPA and say, I'm going to have a write down this year. Oh, get ready. Yeah. Um, yeah. Get, get ready for the, uh, when you have a write-off of all your equity. And then, uh, and this also goes into, I'll do less work with your CPA because on those years you got that write-off, maybe you, sell some capital gains in your portfolio. You know, that's the year to do it.
speaker-0: Mmm, yeah, that's a good tip too. Yeah, words of wisdom there, know, watch out for the earn out. That's really unfortunate. ⁓ kind weaseled you out of some money there. I've heard that happen too. Like that's not the first time I've heard that. I'm sure you've talked to people that ⁓ that's happened also. But I don't know any way to round that. I mean, it decides. ⁓ Like if you have a lawyer maybe that's like really knows ⁓ &A and make sure that contracts ironclad.
speaker-1: Yeah, exactly. And one of the interesting things that that taught me too, actually did call up a lawyer and I said, hey, you know, there's this earn out clause here and is it worth suing? And number he gave me was a number that still sticks in my mind. This might surprise a lot of people in small business. But the number really to get a lawyer involved in any sort of a lawsuit over a contract is about 50 grand. And that may even be higher now because that number is, you know, years old now. But basically anything below about 50 grand, it's not really worth even spinning up a lawyer. It's all just blustering threats back and forth. And so as a small business, if really more the mom and pop side, it's ⁓ something think about. ⁓ If got a customer that owes you 50 grand, you're right on the cusp of whether it makes sense to sue or not. Or if you're owed money, or conversely, you owe someone money. 50 grand is kind of that point at which, you it might make sense to either settle out of court or just call their bluff, right? Cause they're probably not going to try to enforce. So it was a very interesting discussion to have with the lawyer. And basically he said, look, there's, there's going to be a cost for us to do this and there's going to be a time. And if going to spend 50 grand getting this, is that worth what you're going to get? Right. Knowing that there's a chance you may not even get anything. Right. And so that's, that's also been something that's kind of stuck with me as I talked to a lot of smaller startups too. especially smaller startups that are in their first round of funding or kind of pre-seed, 50 grand is kind of the point of no return, right? And so like, if all you got to do is, know, sue for 50 to $100,000, it's not even worth suing, just take the loss and move on, right? And that's for a lot of people, like a non-performance for a key hire or, you know, some sort of a salesperson, you know, exiting and taking a customer or something like that. Like there's a lot of things that fall in that 50 to $100,000 range for small businesses.
speaker-0: Yeah, makes sense. love that kind of 50,000 as a benchmark. That's good advice. Yeah, I know you're expert, of course, in investing. I saw you push back against index funds, ⁓ and I'm curious you know, why the hate? And what would you instead?
speaker-1: Yes. So I will say that in the US, the financial advisor curriculum that everyone learns in order to get licensed has a very strong emphasis on what we call the efficient market hypothesis, which essentially says that at a certain point, all the information that can be known in the market is known. And so therefore, thinking you have an edge is pointless. And basically only carve out that really the curriculum makes is insider information. So if you know something that nobody else does, because you work at the company and you trade on that, well, yes, you can get an edge. then you go to jail because that's illegal. Now, we actually know through academic research is that the efficient market hypothesis is not actually true. There's a number of factors out there that cause publicly traded stocks to move certain directions and continue to move up or down. Like momentum trading is one well-known academically studied and persistent factor. So right away, efficient market hypothesis is not true. And what index funds really rely on is the fact that, the market's eventually going to discover the right price. And so if we just hold everything, we can't pick winners and losers. If we just hold everything, we pick the winners and the losers. Stocks over the long term go up. And therefore, stocks go up over the long term. can't pick winners and losers. Markets are efficient. We might as well just buy everything for the lowest cost possible. And that is a very good thesis over the course of 30 to 40 years, assuming you never look at your portfolio. And where it begins to break down is in real life. When the market drops 30 % and you look at your portfolio and you realize you have $100,000, $500,000 in losses, the human brain starts to freak out. Or let's say it works great over 30 years, but you're four years from retirement and you just happen to be in the wrong four years of that 30 year cycle. Right? Now you're retiring, losing money in your portfolio. And so what sounds good on paper in passively investing in index funds actually breaks down when you meet this real life. And so that's why at Fiery Capital, we don't do passive investing. We take an actively managed portfolio and we take a stance in the markets we try to basically navigate through the markets and have eye towards stopping losses rather than winning every single upside. And what we found is that actually gels with the way humans think. Humans hate losing. They hate losing almost as much, or think it's twice as much as they love winning. And so if you stop a loss, that's incredibly important. And it also helps people stick to the plan they've made. So that's kind of why I a fan of index funds early on in my career until I saw that first drawdown and I sold. And I thought, OK, I know everything that I know. And I've been trained in this, I've got a degree, and yet I still felt the pressure to sell during a downturn and the pressure to do something. And I did, I did something. And if I know all this and I've got all this training, what chance do regular investors have who don't have all this training? So yeah, we really built firewood capital around that premise of like behavioral finance is a thing and you have to meet humans where they are. ⁓ sitting out a 30 % decline and saying, just hold on. not really financial advice people can stick to.
speaker-0: Yeah, definitely. That's a risk a lot of people don't talk about. I grew up on ⁓ simple path to wealth. Jack Fogel, ⁓ Vanguard's of just broad-based index and just hold on. Yeah, you don't think what if the market tanks close to your retirement, right? Yeah, that's really interesting. So for business owners who have most of their wealth tied up in the business, what would you say is the best to diversify portfolio?
speaker-1: Yes. as a business owner, you've got a lot of your net worth tied up in a business and got your income tied up in that same business. And you've got your liabilities tied up in that same business. And you exposed to the cyclicality and market cycles of your business. So the last thing you want to do is have your investments also ⁓ in that boat where your investments are going to go up and down the same way your business does. Right. ⁓ So what you really have to look at, and this is something that I've thought about as well in my own life, I take risks in a certain area of my balance sheet. So for me, I've worked in startups, small businesses. I've kind of had more of a volatile career, ⁓ I've taken lot of risks with my job, which means my portfolio is ⁓ less risky, right? generally tend to steer a little bit more conservative. trade futures in my portfolio, right? I don't, you know, YOLO all my money on Bitcoin when it's down, right? I'm not trying to turn my portfolio into a hundred X bet, right? I'm trying to do that with my day job. Thinking with a business owner, right? You shouldn't be looking at your investment portfolio and saying, I need to take a million and turn it into a billion in my investment portfolio. So I'm going to take risks like that, right? What you should be thinking about is where am I going to take a risk as a business owner? I should be taking my risk on my business. right, betting on myself and my ability to grow my business and whether business, you know, through bad storms and stuff like that. And my portfolio should then be playing defense because what happens during the downturn in your business is you need to tap into your personal net worth and your personal balance sheet to keep your business afloat. More often than not, any bank you're going to talk to as a small business owner or as a business owner ⁓ is to look at your own balance sheet for some sort of personal guarantee for debt. or some sort of financial strengths. And I've had this happen multiple times, being a gearing tour on multimillion dollar loans, where the bank basically says, look, we're probably not gonna come at you for X of dollars, but somebody has to sign on the dotted line that says, can. And so a business owner, ⁓ if you're into buy big real estate or you're financing a large purchase for machinery, there's a high chance that you're going to have to personally sign on the dotted line on that loan. basically tells the bank, know, look, I get it. You're probably not coming after me for a $2 million building because you're probably going to sell the building. But on the off chance that we sell it for 1.8 million and I still owe $200,000 in the loan, I agree. can come at me. And so when is your business going to be in a situation where they're going to enact that clause? Right. It's when your market is down, when your customers aren't paying, when your industry is struggling. And so at that point in time, you need to have a strong personal balance sheet. So if the bank comes to you and says, we need $200,000, you're not turning around to your own portfolio that has gone from a million to say 600,000. And now the bank says, and we want $200,000 out of that. Right? Because now you're looking at a down portfolio and the bank's going to come and force a judgment against you. That's just a really scary place to be. Right? You're watching your business implode. You're watching your portfolio implode. You're watching basically everything implode. Right? And where you want to be is, yeah, my business is imploding, but I've got a leg to stand on. my portfolio. It may not be as much as I want, but it's something that I can lean back on, right? And I can take a little bit of time and kind of recoup and say, what am I going to do my next thing? You know, now that my business has hit a hard, you know, rough patch.
speaker-0: Hmm. Yeah, I love that perspective. Just like first principles kind of thinking just ⁓ analysis. Are you on that you want to be on the offense or defense and your portfolio accordingly?
speaker-1: Let's see that.
speaker-0: Very intuitive, yeah.
speaker-1: Yeah, and not every asset has to be offense at the same time. Same thing, if you've got a business that you've built as a passive income business, and you basically say, look, this is never going to grow beyond X amount of size, maybe now your business becomes the defensive portfolio and you start looking at your investment portfolio as the more aggressive offense. Right? I see people do that with real estate a lot, right? Where if you get your real estate in a good position, your cash flowing heavily, you're not expanding your real estate empire, your debt's well covered. now start going maybe doing venture capital investing out of your portfolio, right? Like you've got a solid income stream off of real estate now, right? So where are going to get your next million? It's probably not in real estate then, right?
speaker-0: Yeah, it makes perfect sense. you mentioned crypto earlier. I wanted to touch on that, you know, seeing as you're an expert ⁓ pretty in this space. What are your thoughts on crypto? ⁓ Like, do recommend, do you have your client, lot of your clients invest in certain coins or just Bitcoin or what's your strategy? Yeah.
speaker-1: Yeah, so we don't generally recommend investments in cryptocurrency for our clients. way that we manage portfolios ⁓ we manage broad base on an industry basis. we look at basically broad based industries. We don't take individual company bets and that's kind of why we also don't take individual crypto coin bets. There's just ⁓ risk inherent an individual that is not there when you look at the whole sector, right? ⁓ The easiest way of explaining this is if you invest in a meme coin and the meme coin goes to zero, doesn't mean that crypto is bad. It meant the meme coin is bad. Right. And so we try to avoid that type of risk in our clients' portfolios. Now, when I look at crypto overall, if we were talking, you know, five years ago, crypto was an attractive place to be where you could, you know, turn $10 into a thousand. You could turn 10,000 into a hundred. Right. you could turn a small amount of money into a fairly large life-changing amount of money. I don't think we're there anymore. I think the days of $10 in Bitcoin and you wake up and you're worth $10 million, those days existed. They're not the days we live in anymore. That was 2015, 2016. ICO craze of 2017 where we minted millionaires out of the Ethereum stack. I think there's enough money in crypto now that crypto is going to continue to stay around. But I also look now at the real world tokenization, the real world asset push. ⁓ think that's where I get the most excited about crypto today. So it's not necessarily an individual meme coin ⁓ what can this coin do, but it's the idea of can you take a real world asset and bring in hundreds of thousands ⁓ people, right? Or if you're a small business, tens to hundreds of people, ⁓ Because I really look at that and I see that's the type of thing that's going to democratize access to real estate. a small business, think real world asset tokenization is going to be great for mom and pop shops. Already, have this idea of crowdfunding money, right? Where you can sell equity in your company to people who are customers and who are strong advocates. I think real world tokenization is going to remove some of that ⁓ friction. and it will allow customers of your business to own a part of your business, right? And be the room where decisions are made type thing, become very strong brand advocates for a very small amount of money. And I think as a business owner, that's probably the best possible outcome. think we're still a bit away from that because there's a bunch of paperwork that has to catch up still. You you K1s to partners and stuff like that, right? Or 1099s. So there's a little bit of IRS paperwork. got to figure out yet. But I think the future, you know, as a business owner, you can imagine taking your top 10 to 100 customers and bringing them on and making them owners. You know, that is customer retention, right? They're going to stick with you because they're a part of your company now. And they're going to be brand advocates because they're a part of your company, right? Like you've now taken the best possible solution and sold it to them for maybe 100 to $1,000 or $10,000. Right? And like that's they're now paying their customer acquisition costs, right? Like that's really cool. So that's what gets me excited about the different side.
speaker-0: Yeah, definitely. I love your outlook on that. It's funny how policy so far behind technology. I was talking to someone about autonomous vehicles and it's the same thing. We're probably still 40 years off before we can get the policy. Technology is already there, but the policy changes that have to be, go through all of the hoops just take forever.
speaker-1: Yes, exactly. I was reading the same thing around the autonomous cabs that they're trying to put out now. Like one of the biggest reasons why we will probably not have fully autonomous cars is the regulations require a steering wheel. And getting the regulations changed to make a steering wheel optional in the right way is like insurmountable thing. Same thing with like ⁓ flying taxis. I was reading about that. Like the reason we don't have a huge flying taxi fleet is regulations. Basically it says where you can and cannot land. airplanes and helicopters. And like, that's why we don't have flying taxes. We have the technology. We just don't have the rules for can you fly a taxi 10 feet above a street, right? And like, in the absence of rules saying you can, aren't going to build flying taxis.
speaker-0: Yeah. That's a great example. Yeah. of technology, AI, I know you're deeply entrenched in that as well. You even your master's right in computer or no, PhD in computer science. I'm curious, you know, from your perspective, how is AI impacting your industry and do see it going?
speaker-1: Yes, so in the industry of financial advising, AI, and I actually gave a talk about this to an industry association about four months ago now. And that talk's already out of date, because at the time I said AI is coming to help us construct portfolios better. And you can pick stocks and you can say, here's my client, here's the risk tolerance, can you give me a stock portfolio or a bond portfolio or a combination of investments that match the risk tolerance? And at that time, it was really cool because I'd just done that. I just built this huge dividend paying portfolio with multiple optimizers and just stuff that you could only get with professional trading software. And I did it all in a weekend with ChatGPT at the time. So that was really cool. Now fast forward about four months, and we are at a point in time where I think AI has drastically increased its utility almost every week. ⁓ three weeks ago, ⁓ don't think we were in the position that we are today. So when I look at the way AI is changing the financial advising industry, for me, on client calls, I have Claude open and I'm typing into Claude when a customer asks a question that I'm like, have a 90 % probability of my answer being right. ⁓ I'll just in like a couple of things I'm just foggy about, ⁓ esoteric rules stuff like that. And just be like, hit enter. And as they're telling you about the situation, I'll have an answer coming back and I'll have it citing regulation and rules and examples and case studies. And so by the time the finishes their question, I've already basically read a case study of something similar and now I've got a grounding in where my answer is going to go. Right. And so like ⁓ time getting clarification on questions ⁓ one thing that I've been using AI for. used to be, know, financial advisors were trained, you know, don't make it up to say, I don't know. And that builds client trust. That's true. I think a better answer now is I know most of this, but give me a second because I've got a few questions, type, type, type. Now I've got the answer. So let's move forward. Right. It's almost like the way that we used Google a couple of years ago in conversations where it was like, I'm going to Google this in the conversation to get the additional context. I laugh. Right. Now we have AI to do that. that's, that's pretty cool. Right. I, I don't think AI is coming for all of our jobs yet. I think there's still a human touch that's required. But AI is getting pretty good at mimicking humans and reading emotions, right? It's gonna be an interesting, very fun feature, you know, but I do know that in my practice, for instance, and I've the story, I think only one or two other times to some folks, but I was quoted an onboarding fee for a marketing company and they were going charge me few thousand dollars to build out some marketing deliverables and then run a Facebook ad campaign. And I looked at a few thousand dollars for an onboarding fee. looked at the cost of tokens using Opus 4.6. And in the course of a weekend, I built software that built their entire onboarding funnel and ran Facebook ads for me for about $300. Wow. I used them as a marketing company. It was just one of those like, no good. I've got a computer science background, so I knew what I was doing. like, I was like, okay, you know, they wanted a few thousand dollars for a few hundred bucks. I replicated their software as a service platform and now I run it. So. Why would I pay them? value do they bring?
speaker-0: wow, causing major disruption ⁓ some industries already. But I agree. ⁓ I you said this earlier, but like, ⁓ there's going to be a degree of human interaction that's required. I think that's probably going to take generations to overcome, right? To be okay with talking ⁓ to someone the phone, you know it's a robot, you know, AI. tool, but they give you the right information. I think especially the baby boomer generation, ⁓ might not ever get there. yeah, humans still necessary to fact check sometimes and keep it in the rails and interface with client at a bare minimum, ⁓
speaker-1: Exactly. Hallucinations are a thing, right? And what I'm finding now is having one AI agent that work is good, but having a fleet of AI agents that each do specialized work is really what the future is, right? So, ⁓ got your AI agent doing marketing, and then you have an AI agent that is checking for compliance ⁓ marketing rules for your industry. And then you have an AI agent that is checking your pictures to make sure the pictures ⁓ pass quality bar. And then you have a copywriter AI agent that checks the copy that you created. So it doesn't sound like AI, right? And then you have an agent that's overseeing all four of those agents to make sure they're all playing together nicely. Right. And so like what was one agent, like just go to chat GPT and ask it, you know, to write your Facebook ad. What it's going to be is like five or six different agents all coordinating the work together. But when you think about that, like if you have a marketing team, right, you got a team, or if you have one marketing person, they're putting on a different hat. Right. And so that is kind of how we're building agents. The one thing I would say though, you talk to a lot of small business owners is if you are in the SaaS software a service business right now, any upfront costs that you put on your customers, a savvy customer is looking at that in the amount of tokens they can buy on an AI model to replicate your entire platform. And it's hard, right? You got screenshots of your SaaS software, you got a website, You tell me it's gonna be $10,000 to onboard me. I will take your website. I will send it over to Claude and I will say, can you spec out what this product is? Tell me how long it's going to take to build and give me an approximate token cost. And it will be less than $10,000. So just something to think about if you're in the SaaS industry right now that like there is a time and I think it's very fast approaching where you are going to be weighed against the cost of tokens to provide your entire platform. So there you go. Something that is a few weeks old now. That is like a few weeks ago, I was not thinking like that. Now I am. So that is 14 days of change.
speaker-0: Yeah, wow, it is so crazy how quickly it's propelling. ⁓ like couple weeks, right, we get something new from AI, some ⁓ new capability. where to go is a little terrifying probably if you're SaaS company owner. ⁓
speaker-1: Yes, exactly. You've got to come up with a reason why your platform existed while you charge what you do charge. otherwise, a computer science engineer with AI really crank this out. ⁓ Also, conversely, you're working with computer science folks in your business right now and you're not using AI, you're being left in the dust. Every one of your ⁓ tech folks should using AI to crank out code. Like I said, my background is in tech and I've done a lot of tech startups, right? So I've got a lot of unique insight into that. Man, it is the best time to be a software developer. And if you've got a team of software devs under you, you should be expecting the world of them right now because they can deliver it.
speaker-0: incredible. Yeah, got to ride the wave, right? ⁓ you the internet was the same way, people are to using it at first and then it became an necessity. ⁓ I think, I think I'm alone in thinking that ⁓ AI is probably going be that disruptive also, right?
speaker-1: Yes, I think that, you I remember having to dial up on the internet, right? And you knew when you were on the internet versus off. over the course of a few years, it became, well, everyone's got a second phone line or you had, you know, a dedicated DSL. And now you don't even think about the internet being a thing that could be off, right? It's like a when it is, right? I think AI is going to be like, right? But you also then think about what the internet has enabled, you know, this podcast being one of the things that like, we're nowhere near each other and we're talking. yet this seems totally normal. Right? So like, ⁓ is the next 10 to 20 years of AI going to look like? Right?
speaker-0: Yeah, exciting and no one knows.
speaker-1: Exactly. It's going to be exciting future though. It'll be a very different future.
speaker-0: Yeah, a lot to look forward to. Well, Adam, it's been an incredible conversation. Thank you so much for all the insights. I always leave listeners with one practical tip. If you could give one practical tip to business owners that they want to build wealth that survives their exit, what would it be?
speaker-1: Yes. So a lot of people will spend, you know, five to 10 years building a business and they'll spend about five minutes planning the exit. And all of sudden you wake up one morning with a very large bank account and then you figure out what you do with your life. What I would suggest business owners do is spend a quarter or two thinking about what your life will look like before the exit and start talking to advisors, financial advisors, legal advisors, before you get there. because a lot of the time you can set up structures to preserve generational wealth and after the fact you end up owing taxes instead. if you spend just a little bit of time before the exit planning for that exit you will be able to hold a lot more generational wealth for your family and your descendants.
speaker-0: Well said. you. You know, a couple of years at least planning in advance, I think is appropriate.
speaker-1: Exactly. Yep, plan early, plan often.
speaker-0: Yeah, absolutely. Well, where can, ⁓ it's been an incredible conversation. Where can listeners find you easiest?
speaker-1: Yeah, so can go to fireweedcapital.com. That's our website. can fill out the contact us form that goes right to me. Otherwise, you can email me directly, ⁓ adam at fireweedcapital.com. And I look forward to answering any financial questions you got.
speaker-0: Awesome, I'll leave that in the show notes. Thanks for your time, Adam.
speaker-1: Awesome. Thanks so much, Pete. Have a great one.
speaker-1: Thanks for having me. Looking forward to being here.
speaker-0: Yeah, can you start off and share with for listeners your background? I read you you you exited three companies and a fourth one what you you did with the IPO route. I loved and you're you know, now just investing investing. You have a big portfolio. I'd to hear how you got started in business and yes, your journey.
speaker-1: Yeah, that's a great question. Yes, I guess we'll kind of go back to college, So I got my undergrad in finance. And like you mentioned, I've got a doctorate computer science. ⁓ I learned best formal education. So I basically just like picked up certifications and degrees along the way. But really got my start in finance. I happen to like capital markets finance. So there's really two routes that you can go and finance. One is corporate finance, where you're basically working inside of the company, working in net present value analysis and stuff like that. And then capital markets finance, which is much more stocks and bonds and what happens every day on Wall Street. So I like the capital market side. That actually led me into a brief stint in investment banking. For those of who don't know what investment banking is, if you are scaling a company and readying it for sale, investment bankers are who you're going to talk to most likely. Investment bankers are basically real estate agents, but for businesses. So you sell a business you don't own to a buyer and you make a commission off of it much the same way a real estate agent sells a house. yeah, worked in investment banking for a little bit and actually left investment banking for my first startup that we ended up selling. My first time at the exit table was kind of luckily there that I had had a background in investment banking. ⁓ Seen some deals go through, been a part of a few deal teams. So I knew enough to ⁓ sit on the other side of an exit table and kind of negotiate some terms. And then that was really my foray into tech. We sold the company. I got kind of on in the acquiring company and they wanted to build a mobile app kind of lab around myself and some other companies that they were acquiring. moved into tech at that point and then spent, ⁓ gosh, probably more than a decade in tech. And was in tech between, know, founding companies and selling them, eventually working Coinbase ⁓ during the You know, spent a lot of time in crypto, about nine years in crypto as well. So yeah, really, you know, did a lot of tech and kind of throughout all of that was always the person that ended up answering finance questions. With my background in capital markets finance, I was always the person that ended up talking, well, you should do with retirement. Here's how you should think about, you know, stocks and bonds and investments. A couple of years ago, I decided I should get paid for this. And so I went and became a licensed financial advisor and ⁓ just you know, friends and family members to begin with. And then that really turned into what Firewood is today, ⁓ which is financial advisory firm focused on tech individuals and tech families. basically like myself.
speaker-0: Yeah, gotcha. Yeah, it makes perfect sense. You've been on all sides of the transaction there. In-house experience. ⁓ Yeah, I'd love to dive in a little bit on the specifics of your exits. Yeah, did you learn anything? Is there anything you would have done different? ⁓ imagine the second and third were probably a little more smooth.
speaker-1: Exactly, yep. Yes. ⁓ man. Yeah. exit you learn a little bit more. So the first exit that we did was a mobile app that my friend and I had built. And we a company reach out to us and say, you we want to acquire the app, ⁓ bring you on. ⁓ And, like said, kind of build a mobile app studio ⁓ around us. you know, that was... ⁓ That was my first exit where I really got to look at the deal terms and negotiate them. Right. So I had seen previous exits, you know, in the hundreds of millions of dollars range and you know, there's earn out clauses and there's lawyers that get involved and there's this whole official process you do. And so I kind of came to it with that view of like, well, there's going to be a whole bunch of clauses and really there wasn't, it was a pretty simple term sheet what the acquiring company was looking for really was could we prove out the value in the mobile app? and really show that there is a future business there. And what we ended up doing was basically trying to meet the metrics that they put in front of us and them in any way possible. And so, fun lesson learned in that one was we spent a lot of time and effort to try to meet the metrics through any means possible. And what we found out after meeting the metrics through any means possible was what we had interpreted the agreement to mean, which was certain numbers had to be hit to get an additional earn out. The acquiring company had a very different view, which was certain numbers had to be hit a certain way to show sustainability of the business.
speaker-0: Mmm.
speaker-1: And it was a very interesting kind of second phase of the negotiation because what they basically said is, look, you guys, took any means possible to meet those numbers. And what we wanted was to prove out the viability of the long-term value that we were going to acquire. And so basically we this mismatch between ⁓ us being short-term incentivized to kind of get these numbers up to what they wanted to see and them having a long-term view. that's really where, I for me, I learned he who has the gold makes the rules. That's the golden rule of business. what we basically ended up with from the acquiring company was a decision ⁓ well, do you fight for this earn out, which was ⁓ portion of money, but not a ton, or do you stick around ⁓ kind of continue to build their And my and I chose, my co-founder and I chose different routes. He left, I stayed. He basically said, no, I want that earn up money. And they didn't agree to the terms that we had on paper. And I said, I want that earn up money too, but I also get their point of view. And I'd rather stick around and grow and build this new company. that was kind of one of the first things I learned. Is that what you have written down, what you end up with when the check has ⁓ the bank are two different things. Wow. Fun couple weeks of very heated phone calls back and forth, right?
speaker-0: ⁓ my gosh
speaker-1: Yeah, so that was the first thing. Make sure everyone at the table understands the goal you're aiming for, right? And so, you know, some subsequent earn outs, exits, I should say, you that there were earn outs. ⁓ basically, you know, same thing, you know, hit certain numbers, get to certain metrics to show viability and, you know, get an additional payout. And went in with my eyes open in the next couple of times because I basically got to say, hey, you know, look, there was one that I knew there was an earn out clause in there and I knew it was going to be unlikely we were going to hit it. And so when we sold that company, I basically said, I'm going to take that value of the contract and remove that in my mental math. And I'm going to basically negotiate as if I'm not going to get an earn out. And I was right. We didn't get that earn out. The targets were too aggressive. ⁓ so we basically said, OK, well, let's negotiate everything else but that earn out and just kind of let them have that, give them a win. And we'll to negotiate. everything else. So we get the best possible deal we can knowing that we're probably not going to hit the iron out and hey, it's gravy if we do.
speaker-0: Gotcha. Yeah, that's awesome. You learned from the first time.
speaker-1: Exactly. Yep.
speaker-0: Yeah, did you have a business broker or investment bank you in the sale process?
speaker-1: You know, I actually didn't. None of the exits, we used a ⁓ investment bank for that. I have worked with investment banks. There was a capital raise we did for another business that business, know, like any good entrepreneur, there's always more failures and successes. So that particular business ended up failing. But yeah, we were using an investment bank to try to raise some debt, basically to expand the business. ⁓ And just was... ⁓ was around like the 2014 era and just the macroeconomic cycle was not good. And so we did not get anyone really biting to give us debt, which was a unique and interesting experience. know, like, again, working for investment banks, you know, there's a very deep bench of folks that that bank knows and they talk to. And so being on the other side as a company then having an investment bank go out to the market and come back with no one wants what you're selling. That was like, oh, So you can fail, you can fail the race capital, right? And there's so much from the viewers out there that say, well, yeah, of course you can the race capital. I've failed the race capital, right? But for me, that was really the first time that like, we went out there to raise and we had, know, an A team and nobody wanted it. So it's kind of like, well, if nobody wants to give us debt to expand the company, we might as well wrap it up. You know, so we did, we just wrapped up that company and said, well, it's not worth really pursuing the... pursuing that concept any further, know, just take a loss.
speaker-0: Gotcha. Yeah, no one to pivot.
speaker-1: Exactly. Yep. No one to pivot and no one to call your CPA and say, I'm going to have a write down this year. Oh, get ready. Yeah. Um, yeah. Get, get ready for the, uh, when you have a write-off of all your equity. And then, uh, and this also goes into, I'll do less work with your CPA because on those years you got that write-off, maybe you, sell some capital gains in your portfolio. You know, that's the year to do it.
speaker-0: Mmm, yeah, that's a good tip too. Yeah, words of wisdom there, know, watch out for the earn out. That's really unfortunate. ⁓ kind weaseled you out of some money there. I've heard that happen too. Like that's not the first time I've heard that. I'm sure you've talked to people that ⁓ that's happened also. But I don't know any way to round that. I mean, it decides. ⁓ Like if you have a lawyer maybe that's like really knows ⁓ &A and make sure that contracts ironclad.
speaker-1: Yeah, exactly. And one of the interesting things that that taught me too, actually did call up a lawyer and I said, hey, you know, there's this earn out clause here and is it worth suing? And number he gave me was a number that still sticks in my mind. This might surprise a lot of people in small business. But the number really to get a lawyer involved in any sort of a lawsuit over a contract is about 50 grand. And that may even be higher now because that number is, you know, years old now. But basically anything below about 50 grand, it's not really worth even spinning up a lawyer. It's all just blustering threats back and forth. And so as a small business, if really more the mom and pop side, it's ⁓ something think about. ⁓ If got a customer that owes you 50 grand, you're right on the cusp of whether it makes sense to sue or not. Or if you're owed money, or conversely, you owe someone money. 50 grand is kind of that point at which, you it might make sense to either settle out of court or just call their bluff, right? Cause they're probably not going to try to enforce. So it was a very interesting discussion to have with the lawyer. And basically he said, look, there's, there's going to be a cost for us to do this and there's going to be a time. And if going to spend 50 grand getting this, is that worth what you're going to get? Right. Knowing that there's a chance you may not even get anything. Right. And so that's, that's also been something that's kind of stuck with me as I talked to a lot of smaller startups too. especially smaller startups that are in their first round of funding or kind of pre-seed, 50 grand is kind of the point of no return, right? And so like, if all you got to do is, know, sue for 50 to $100,000, it's not even worth suing, just take the loss and move on, right? And that's for a lot of people, like a non-performance for a key hire or, you know, some sort of a salesperson, you know, exiting and taking a customer or something like that. Like there's a lot of things that fall in that 50 to $100,000 range for small businesses.
speaker-0: Yeah, makes sense. love that kind of 50,000 as a benchmark. That's good advice. Yeah, I know you're expert, of course, in investing. I saw you push back against index funds, ⁓ and I'm curious you know, why the hate? And what would you instead?
speaker-1: Yes. So I will say that in the US, the financial advisor curriculum that everyone learns in order to get licensed has a very strong emphasis on what we call the efficient market hypothesis, which essentially says that at a certain point, all the information that can be known in the market is known. And so therefore, thinking you have an edge is pointless. And basically only carve out that really the curriculum makes is insider information. So if you know something that nobody else does, because you work at the company and you trade on that, well, yes, you can get an edge. then you go to jail because that's illegal. Now, we actually know through academic research is that the efficient market hypothesis is not actually true. There's a number of factors out there that cause publicly traded stocks to move certain directions and continue to move up or down. Like momentum trading is one well-known academically studied and persistent factor. So right away, efficient market hypothesis is not true. And what index funds really rely on is the fact that, the market's eventually going to discover the right price. And so if we just hold everything, we can't pick winners and losers. If we just hold everything, we pick the winners and the losers. Stocks over the long term go up. And therefore, stocks go up over the long term. can't pick winners and losers. Markets are efficient. We might as well just buy everything for the lowest cost possible. And that is a very good thesis over the course of 30 to 40 years, assuming you never look at your portfolio. And where it begins to break down is in real life. When the market drops 30 % and you look at your portfolio and you realize you have $100,000, $500,000 in losses, the human brain starts to freak out. Or let's say it works great over 30 years, but you're four years from retirement and you just happen to be in the wrong four years of that 30 year cycle. Right? Now you're retiring, losing money in your portfolio. And so what sounds good on paper in passively investing in index funds actually breaks down when you meet this real life. And so that's why at Fiery Capital, we don't do passive investing. We take an actively managed portfolio and we take a stance in the markets we try to basically navigate through the markets and have eye towards stopping losses rather than winning every single upside. And what we found is that actually gels with the way humans think. Humans hate losing. They hate losing almost as much, or think it's twice as much as they love winning. And so if you stop a loss, that's incredibly important. And it also helps people stick to the plan they've made. So that's kind of why I a fan of index funds early on in my career until I saw that first drawdown and I sold. And I thought, OK, I know everything that I know. And I've been trained in this, I've got a degree, and yet I still felt the pressure to sell during a downturn and the pressure to do something. And I did, I did something. And if I know all this and I've got all this training, what chance do regular investors have who don't have all this training? So yeah, we really built firewood capital around that premise of like behavioral finance is a thing and you have to meet humans where they are. ⁓ sitting out a 30 % decline and saying, just hold on. not really financial advice people can stick to.
speaker-0: Yeah, definitely. That's a risk a lot of people don't talk about. I grew up on ⁓ simple path to wealth. Jack Fogel, ⁓ Vanguard's of just broad-based index and just hold on. Yeah, you don't think what if the market tanks close to your retirement, right? Yeah, that's really interesting. So for business owners who have most of their wealth tied up in the business, what would you say is the best to diversify portfolio?
speaker-1: Yes. as a business owner, you've got a lot of your net worth tied up in a business and got your income tied up in that same business. And you've got your liabilities tied up in that same business. And you exposed to the cyclicality and market cycles of your business. So the last thing you want to do is have your investments also ⁓ in that boat where your investments are going to go up and down the same way your business does. Right. ⁓ So what you really have to look at, and this is something that I've thought about as well in my own life, I take risks in a certain area of my balance sheet. So for me, I've worked in startups, small businesses. I've kind of had more of a volatile career, ⁓ I've taken lot of risks with my job, which means my portfolio is ⁓ less risky, right? generally tend to steer a little bit more conservative. trade futures in my portfolio, right? I don't, you know, YOLO all my money on Bitcoin when it's down, right? I'm not trying to turn my portfolio into a hundred X bet, right? I'm trying to do that with my day job. Thinking with a business owner, right? You shouldn't be looking at your investment portfolio and saying, I need to take a million and turn it into a billion in my investment portfolio. So I'm going to take risks like that, right? What you should be thinking about is where am I going to take a risk as a business owner? I should be taking my risk on my business. right, betting on myself and my ability to grow my business and whether business, you know, through bad storms and stuff like that. And my portfolio should then be playing defense because what happens during the downturn in your business is you need to tap into your personal net worth and your personal balance sheet to keep your business afloat. More often than not, any bank you're going to talk to as a small business owner or as a business owner ⁓ is to look at your own balance sheet for some sort of personal guarantee for debt. or some sort of financial strengths. And I've had this happen multiple times, being a gearing tour on multimillion dollar loans, where the bank basically says, look, we're probably not gonna come at you for X of dollars, but somebody has to sign on the dotted line that says, can. And so a business owner, ⁓ if you're into buy big real estate or you're financing a large purchase for machinery, there's a high chance that you're going to have to personally sign on the dotted line on that loan. basically tells the bank, know, look, I get it. You're probably not coming after me for a $2 million building because you're probably going to sell the building. But on the off chance that we sell it for 1.8 million and I still owe $200,000 in the loan, I agree. can come at me. And so when is your business going to be in a situation where they're going to enact that clause? Right. It's when your market is down, when your customers aren't paying, when your industry is struggling. And so at that point in time, you need to have a strong personal balance sheet. So if the bank comes to you and says, we need $200,000, you're not turning around to your own portfolio that has gone from a million to say 600,000. And now the bank says, and we want $200,000 out of that. Right? Because now you're looking at a down portfolio and the bank's going to come and force a judgment against you. That's just a really scary place to be. Right? You're watching your business implode. You're watching your portfolio implode. You're watching basically everything implode. Right? And where you want to be is, yeah, my business is imploding, but I've got a leg to stand on. my portfolio. It may not be as much as I want, but it's something that I can lean back on, right? And I can take a little bit of time and kind of recoup and say, what am I going to do my next thing? You know, now that my business has hit a hard, you know, rough patch.
speaker-0: Hmm. Yeah, I love that perspective. Just like first principles kind of thinking just ⁓ analysis. Are you on that you want to be on the offense or defense and your portfolio accordingly?
speaker-1: Let's see that.
speaker-0: Very intuitive, yeah.
speaker-1: Yeah, and not every asset has to be offense at the same time. Same thing, if you've got a business that you've built as a passive income business, and you basically say, look, this is never going to grow beyond X amount of size, maybe now your business becomes the defensive portfolio and you start looking at your investment portfolio as the more aggressive offense. Right? I see people do that with real estate a lot, right? Where if you get your real estate in a good position, your cash flowing heavily, you're not expanding your real estate empire, your debt's well covered. now start going maybe doing venture capital investing out of your portfolio, right? Like you've got a solid income stream off of real estate now, right? So where are going to get your next million? It's probably not in real estate then, right?
speaker-0: Yeah, it makes perfect sense. you mentioned crypto earlier. I wanted to touch on that, you know, seeing as you're an expert ⁓ pretty in this space. What are your thoughts on crypto? ⁓ Like, do recommend, do you have your client, lot of your clients invest in certain coins or just Bitcoin or what's your strategy? Yeah.
speaker-1: Yeah, so we don't generally recommend investments in cryptocurrency for our clients. way that we manage portfolios ⁓ we manage broad base on an industry basis. we look at basically broad based industries. We don't take individual company bets and that's kind of why we also don't take individual crypto coin bets. There's just ⁓ risk inherent an individual that is not there when you look at the whole sector, right? ⁓ The easiest way of explaining this is if you invest in a meme coin and the meme coin goes to zero, doesn't mean that crypto is bad. It meant the meme coin is bad. Right. And so we try to avoid that type of risk in our clients' portfolios. Now, when I look at crypto overall, if we were talking, you know, five years ago, crypto was an attractive place to be where you could, you know, turn $10 into a thousand. You could turn 10,000 into a hundred. Right. you could turn a small amount of money into a fairly large life-changing amount of money. I don't think we're there anymore. I think the days of $10 in Bitcoin and you wake up and you're worth $10 million, those days existed. They're not the days we live in anymore. That was 2015, 2016. ICO craze of 2017 where we minted millionaires out of the Ethereum stack. I think there's enough money in crypto now that crypto is going to continue to stay around. But I also look now at the real world tokenization, the real world asset push. ⁓ think that's where I get the most excited about crypto today. So it's not necessarily an individual meme coin ⁓ what can this coin do, but it's the idea of can you take a real world asset and bring in hundreds of thousands ⁓ people, right? Or if you're a small business, tens to hundreds of people, ⁓ Because I really look at that and I see that's the type of thing that's going to democratize access to real estate. a small business, think real world asset tokenization is going to be great for mom and pop shops. Already, have this idea of crowdfunding money, right? Where you can sell equity in your company to people who are customers and who are strong advocates. I think real world tokenization is going to remove some of that ⁓ friction. and it will allow customers of your business to own a part of your business, right? And be the room where decisions are made type thing, become very strong brand advocates for a very small amount of money. And I think as a business owner, that's probably the best possible outcome. think we're still a bit away from that because there's a bunch of paperwork that has to catch up still. You you K1s to partners and stuff like that, right? Or 1099s. So there's a little bit of IRS paperwork. got to figure out yet. But I think the future, you know, as a business owner, you can imagine taking your top 10 to 100 customers and bringing them on and making them owners. You know, that is customer retention, right? They're going to stick with you because they're a part of your company now. And they're going to be brand advocates because they're a part of your company, right? Like you've now taken the best possible solution and sold it to them for maybe 100 to $1,000 or $10,000. Right? And like that's they're now paying their customer acquisition costs, right? Like that's really cool. So that's what gets me excited about the different side.
speaker-0: Yeah, definitely. I love your outlook on that. It's funny how policy so far behind technology. I was talking to someone about autonomous vehicles and it's the same thing. We're probably still 40 years off before we can get the policy. Technology is already there, but the policy changes that have to be, go through all of the hoops just take forever.
speaker-1: Yes, exactly. I was reading the same thing around the autonomous cabs that they're trying to put out now. Like one of the biggest reasons why we will probably not have fully autonomous cars is the regulations require a steering wheel. And getting the regulations changed to make a steering wheel optional in the right way is like insurmountable thing. Same thing with like ⁓ flying taxis. I was reading about that. Like the reason we don't have a huge flying taxi fleet is regulations. Basically it says where you can and cannot land. airplanes and helicopters. And like, that's why we don't have flying taxes. We have the technology. We just don't have the rules for can you fly a taxi 10 feet above a street, right? And like, in the absence of rules saying you can, aren't going to build flying taxis.
speaker-0: Yeah. That's a great example. Yeah. of technology, AI, I know you're deeply entrenched in that as well. You even your master's right in computer or no, PhD in computer science. I'm curious, you know, from your perspective, how is AI impacting your industry and do see it going?
speaker-1: Yes, so in the industry of financial advising, AI, and I actually gave a talk about this to an industry association about four months ago now. And that talk's already out of date, because at the time I said AI is coming to help us construct portfolios better. And you can pick stocks and you can say, here's my client, here's the risk tolerance, can you give me a stock portfolio or a bond portfolio or a combination of investments that match the risk tolerance? And at that time, it was really cool because I'd just done that. I just built this huge dividend paying portfolio with multiple optimizers and just stuff that you could only get with professional trading software. And I did it all in a weekend with ChatGPT at the time. So that was really cool. Now fast forward about four months, and we are at a point in time where I think AI has drastically increased its utility almost every week. ⁓ three weeks ago, ⁓ don't think we were in the position that we are today. So when I look at the way AI is changing the financial advising industry, for me, on client calls, I have Claude open and I'm typing into Claude when a customer asks a question that I'm like, have a 90 % probability of my answer being right. ⁓ I'll just in like a couple of things I'm just foggy about, ⁓ esoteric rules stuff like that. And just be like, hit enter. And as they're telling you about the situation, I'll have an answer coming back and I'll have it citing regulation and rules and examples and case studies. And so by the time the finishes their question, I've already basically read a case study of something similar and now I've got a grounding in where my answer is going to go. Right. And so like ⁓ time getting clarification on questions ⁓ one thing that I've been using AI for. used to be, know, financial advisors were trained, you know, don't make it up to say, I don't know. And that builds client trust. That's true. I think a better answer now is I know most of this, but give me a second because I've got a few questions, type, type, type. Now I've got the answer. So let's move forward. Right. It's almost like the way that we used Google a couple of years ago in conversations where it was like, I'm going to Google this in the conversation to get the additional context. I laugh. Right. Now we have AI to do that. that's, that's pretty cool. Right. I, I don't think AI is coming for all of our jobs yet. I think there's still a human touch that's required. But AI is getting pretty good at mimicking humans and reading emotions, right? It's gonna be an interesting, very fun feature, you know, but I do know that in my practice, for instance, and I've the story, I think only one or two other times to some folks, but I was quoted an onboarding fee for a marketing company and they were going charge me few thousand dollars to build out some marketing deliverables and then run a Facebook ad campaign. And I looked at a few thousand dollars for an onboarding fee. looked at the cost of tokens using Opus 4.6. And in the course of a weekend, I built software that built their entire onboarding funnel and ran Facebook ads for me for about $300. Wow. I used them as a marketing company. It was just one of those like, no good. I've got a computer science background, so I knew what I was doing. like, I was like, okay, you know, they wanted a few thousand dollars for a few hundred bucks. I replicated their software as a service platform and now I run it. So. Why would I pay them? value do they bring?
speaker-0: wow, causing major disruption ⁓ some industries already. But I agree. ⁓ I you said this earlier, but like, ⁓ there's going to be a degree of human interaction that's required. I think that's probably going to take generations to overcome, right? To be okay with talking ⁓ to someone the phone, you know it's a robot, you know, AI. tool, but they give you the right information. I think especially the baby boomer generation, ⁓ might not ever get there. yeah, humans still necessary to fact check sometimes and keep it in the rails and interface with client at a bare minimum, ⁓
speaker-1: Exactly. Hallucinations are a thing, right? And what I'm finding now is having one AI agent that work is good, but having a fleet of AI agents that each do specialized work is really what the future is, right? So, ⁓ got your AI agent doing marketing, and then you have an AI agent that is checking for compliance ⁓ marketing rules for your industry. And then you have an AI agent that is checking your pictures to make sure the pictures ⁓ pass quality bar. And then you have a copywriter AI agent that checks the copy that you created. So it doesn't sound like AI, right? And then you have an agent that's overseeing all four of those agents to make sure they're all playing together nicely. Right. And so like what was one agent, like just go to chat GPT and ask it, you know, to write your Facebook ad. What it's going to be is like five or six different agents all coordinating the work together. But when you think about that, like if you have a marketing team, right, you got a team, or if you have one marketing person, they're putting on a different hat. Right. And so that is kind of how we're building agents. The one thing I would say though, you talk to a lot of small business owners is if you are in the SaaS software a service business right now, any upfront costs that you put on your customers, a savvy customer is looking at that in the amount of tokens they can buy on an AI model to replicate your entire platform. And it's hard, right? You got screenshots of your SaaS software, you got a website, You tell me it's gonna be $10,000 to onboard me. I will take your website. I will send it over to Claude and I will say, can you spec out what this product is? Tell me how long it's going to take to build and give me an approximate token cost. And it will be less than $10,000. So just something to think about if you're in the SaaS industry right now that like there is a time and I think it's very fast approaching where you are going to be weighed against the cost of tokens to provide your entire platform. So there you go. Something that is a few weeks old now. That is like a few weeks ago, I was not thinking like that. Now I am. So that is 14 days of change.
speaker-0: Yeah, wow, it is so crazy how quickly it's propelling. ⁓ like couple weeks, right, we get something new from AI, some ⁓ new capability. where to go is a little terrifying probably if you're SaaS company owner. ⁓
speaker-1: Yes, exactly. You've got to come up with a reason why your platform existed while you charge what you do charge. otherwise, a computer science engineer with AI really crank this out. ⁓ Also, conversely, you're working with computer science folks in your business right now and you're not using AI, you're being left in the dust. Every one of your ⁓ tech folks should using AI to crank out code. Like I said, my background is in tech and I've done a lot of tech startups, right? So I've got a lot of unique insight into that. Man, it is the best time to be a software developer. And if you've got a team of software devs under you, you should be expecting the world of them right now because they can deliver it.
speaker-0: incredible. Yeah, got to ride the wave, right? ⁓ you the internet was the same way, people are to using it at first and then it became an necessity. ⁓ I think, I think I'm alone in thinking that ⁓ AI is probably going be that disruptive also, right?
speaker-1: Yes, I think that, you I remember having to dial up on the internet, right? And you knew when you were on the internet versus off. over the course of a few years, it became, well, everyone's got a second phone line or you had, you know, a dedicated DSL. And now you don't even think about the internet being a thing that could be off, right? It's like a when it is, right? I think AI is going to be like, right? But you also then think about what the internet has enabled, you know, this podcast being one of the things that like, we're nowhere near each other and we're talking. yet this seems totally normal. Right? So like, ⁓ is the next 10 to 20 years of AI going to look like? Right?
speaker-0: Yeah, exciting and no one knows.
speaker-1: Exactly. It's going to be exciting future though. It'll be a very different future.
speaker-0: Yeah, a lot to look forward to. Well, Adam, it's been an incredible conversation. Thank you so much for all the insights. I always leave listeners with one practical tip. If you could give one practical tip to business owners that they want to build wealth that survives their exit, what would it be?
speaker-1: Yes. So a lot of people will spend, you know, five to 10 years building a business and they'll spend about five minutes planning the exit. And all of sudden you wake up one morning with a very large bank account and then you figure out what you do with your life. What I would suggest business owners do is spend a quarter or two thinking about what your life will look like before the exit and start talking to advisors, financial advisors, legal advisors, before you get there. because a lot of the time you can set up structures to preserve generational wealth and after the fact you end up owing taxes instead. if you spend just a little bit of time before the exit planning for that exit you will be able to hold a lot more generational wealth for your family and your descendants.
speaker-0: Well said. you. You know, a couple of years at least planning in advance, I think is appropriate.
speaker-1: Exactly. Yep, plan early, plan often.
speaker-0: Yeah, absolutely. Well, where can, ⁓ it's been an incredible conversation. Where can listeners find you easiest?
speaker-1: Yeah, so can go to fireweedcapital.com. That's our website. can fill out the contact us form that goes right to me. Otherwise, you can email me directly, ⁓ adam at fireweedcapital.com. And I look forward to answering any financial questions you got.
speaker-0: Awesome, I'll leave that in the show notes. Thanks for your time, Adam.
speaker-1: Awesome. Thanks so much, Pete. Have a great one.
