Merkle

Ask yourself this: what is the most valuable thing a company has? Is it customer data? Or the patents protecting its products? To Merkle founder David Williams, the answer is easy. The most valuable thing a company has is its culture. To his mind, it was Merkle’s culture that has propelled his company to approximately $2B in revenue and 15K employees. David believed in the importance of culture so much that he would personally train every new employee on the 25+ beliefs of the company. 

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The belief in his team and in his company also started with a belief in himself. He acquired Merkle when he was 24 years old for $5.3M. To save money while he was raising the money to buy out the company, he moved his family into his grandmother’s house in a retirement community for almost an entire year. From there, he bootstrapped the company for another 20 years before raising outside capital. 

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Ultimately David and Merkle’s story is about the power of compounding. What happens when you consistently, constantly, relentlessly give your best to a company for multiple decades? The answer is simple: magic happens. 

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We hope you enjoy this conversation with Bootstrapped Legend David Williams. If you’re interested in learning more about David’s business philosophy, you can check out this paper he wrote on growing a great business, and this article by the Harvard Business Review.

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If you’re interested in staying in the loop when new episodes of Bootstrapped Legends launch, you can subscribe here. If you're a Bootstrapped Legend who wants to tell your story or learn more about working with us, please reach out to us at knowledge@tidemarkcap.com.

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Dave: Let’s start by talking about Merkle as it is today. It’s a pretty amazing story. How big is the business now? What role does it play in the ecosystem? 

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David: Merkle today is north of $2 billion in revenue and north of $500 million in EBITDA. It’s roughly 15-16 thousand people and something like 28 countries. It’s the largest tech-enabled, data-driven performance marketing agency in the world at this point. It’s also, anecdotally, the largest deployer of Adobe Marketing Cloud in the world. It’s really a combination of a technology-managed service and deployment business married to a digital marketing agency.

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Dave: That’s amazing. What’s your history? What were you doing before Merkle?

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David: I had an entrepreneurial bug in me from a young age and ended up running a landscape business in high school and college. I owned a piece of the company, sold it, and became a stockbroker in the mid-’80s when I was 23 years old. However, it became apparent to me pretty quickly that I didn’t like the Lone Ranger dynamic of being a broker, although I loved the financial markets. 

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One of my clients, Harvey, who owned a company called Merkle Computer Systems, called me one day and said he was going to sell his business. I wasn’t really loving retail stock brokerage, so I said, “Let me come spend a day with you and see what this business is like.” I did that and thought, I’m going to try to buy this thing. The company was roughly $2.8 million in revenue and about $800,000 in EBITDA; he wanted $5.3 million for it. 

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I started trying to figure out how the heck I would raise the money. I grew up in a traditional middle class. My dad was a pharmaceutical sales rep; we didn’t really have any family resources. However, I had saved some money, bought a couple of houses in college—things like that. I had about 150 grand, and back in those days, there was virtually no real private equity world. Raising money was all about individuals. I ended up raising a couple hundred thousand dollars from another one of my clients who’d just sold his publishing company to Dun & Bradstreet.

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It took me a year to get the deal done. This is not something I share often, but I had a little bit of an intervention with my family. It was basically like, “You have a good job. You’re married. You have a child on the way. Is this really a good idea?” The conclusion I drew from that conversation was, “You’re right! I should quit my job, move  into a retirement community with my grandmother in Maryland, and work full time on trying to buy Merkle.”

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And the truth is, Harvey helped. I had 13 banks tell me no. I think we took on $2.2 million of primary debt with the bank, and then Harvey basically took back the rest of the purchase price. We bought the business with something like $350,000 in capital and had a very highly leveraged structure.

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Dave: Put yourself in the shoes of Harvey or your client who just had a liquidity event. These people are writing real checks to back a 24-year-old. What did they see in you? What was going on, David?

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David: You know, Dave, it was a different time. My other customer, I drove to his office in Princeton, New Jersey, and after a 30-minute meeting, he said, “I’ll do it.” We didn’t have any documentation. We had nothing, but I had a tenacious appetite to figure out; why not me? Why can’t I get this done? And I think people could feel that energy and that enthusiasm.

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And the real opportunity was Harvey. He was a fighter pilot in Vietnam and taught at the Air Force school. He actually didn’t want to sell the company to some 45-year-old peer; he loved the idea that I was some 24-year-old kid. That was what he knew how to deal with. He agreed to stick around for two years and teach me the business. I trusted him, and he was a guy of very high integrity.

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I joined as the president and became the company’s 24th employee. We were a small data processing company doing mailing list management outside of Washington, DC, and our clients were pretty much all unions, associations, etc., in DC. That was the core of the business.

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Dave: You were 24 years old. What did you know about list processing?

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David: Nothing. [Laughs] Absolutely nothing!

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Dave: How long did it take you to convince yourself that you knew something about list processing?

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David: I never did know anything about list processing, really. I ultimately learned the business, but it was more that I just wanted to own a company. I almost didn’t care what it did. It wasn’t like I was saying, “Hey, I want to start a marketing services business!” 

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This company had a long track record. It wasn’t growing in any material way, but it had a consistent customer base. That’s what I bet on—though being young and naïve was a really powerful asset. If I knew more, I probably wouldn’t have done the deal!

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In the first six months, we lost our second-biggest client. Our bank, Perpetual Savings Bank, got taken over by the FDIC (think about the S&L crisis in the late ’80s and early ’90s). Harvey also had a heart attack. He didn’t pass away, but it meant he was out of the picture five or six months into the deal. I thought to myself, jeez, this isn’t going as well as I hoped, but what other options do I have? 

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We worked seven days a week, 10-12 hours a day, and just did the work. We started to grow our way out of it, and I gained more confidence in the industry and my ability to hire people. The first five years were about learning the industry, finding my footing, and getting the bank paid off. We did all those things. Then it was time for a reset. What was the growth path going to look like from here?

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Dave: Who were you learning from? Who were your teachers?

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David: Harvey was a big teacher of mine. My dad passed away when I was in my 20s, so Harvey kind of took on that role for me. Neil Overman, who co-invested in the deal, also became a mentor of mine. I learned a lot from Neil, especially in the sales world.

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In all honesty, what I figured out very quickly was to hire people. I started hiring people who knew a lot more than me and spent tons of time extracting information from them. I wanted an executive team that I could learn from, where we would learn together.

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I was also a ferocious business reader. I spent lots of time trying to figure out not only where the industry was going but also how to build a great company and manage a great business.

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Dave: How are you hiring these people you can learn from in the early days? A lot of companies rely on having great backers, stock options, etc. How do you hire talent without the signaling of others behind you?

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David: It was hard, but it was also a different time. Private equity was very immature back in those days, so people weren’t used to that idea. You hired with the vision of building something great without an exit plan or timeline. Some people struggled with getting their heads around that, but for the most part, that was an attractive thing. The pitch was, “We’re going to work on this for a long time. We’re young, we’ve got a long-term horizon, and we’re going to build a big business.”

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 After the first five or six years, we made a very small acquisition, and that led to a second acquisition, which really upped the talent game. I was able to start to really recruit. Actually, a guy named Tim Berry, who came from AT&T Bell Labs, was probably one of the earlier people that I recruited. A guy named Don Patrick came out of JP Morgan. My brother actually came to work for us. Things like that. But it didn’t happen overnight. It was six, seven, or eight years into the journey before I was able to start to recruit that kind of talent.

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We didn’t come from the industry, so we had a different perspective. Whether we were right or wrong, we had a strong point of view. There was never a moment where it was unclear what our path forward was. We called it “clarity over certainty.” We were crystal clear on what we were going to do; we just weren’t certain if it was going to work. If we needed to change it, we would change it and be clear and certain again. That started to attract people that were generally ambitious. We weren’t a bunch of Harvard MBAs; it was just a bootstrap mentality from the beginning.

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Dave: Having worked with you, I can say that it seemed like you had a system in your head. You were teaching this to yourself—reading books, learning from others. Describe the management system you built. What is your management philosophy? 

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David: This question comes back to a topic you and I have discussed before: the magic of compounding. I think many people understand economic compounding, though few actually do it. What people miss in developing a business is the power of compounding knowledge, cultural norms, and management systems. In my humble opinion, you can’t build a great company in five, six, or seven years. It’s just not possible. Look at the Ubers and WeWorks—I mean, there’s a reason people write books about these things, right? They were great products and fantastic value propositions for consumers, but they’re shitty companies.

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We worked on economic compounding at Merkle over a period of 32 years—but we also understood the power of compounding through a strong belief system. We ultimately believe, especially in a services business, that the only form of competitive advantage is your culture. I’ve said that for 20 years now. A CEO has to own the culture. Any CEO that outsources culture to HR doesn’t even understand what culture is. Culture is a set of values that you hold dear and are pretty innate, and it’s a set of beliefs that are formed from those values. I think that people understand values on an innate basis; beliefs are something you have to teach people. How do you create innovation inside a business? You build a belief system, which creates a behavior system. That drives innovation.

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I’ll give you an example of belief for us. We had a belief that business is personal. When I first came to Merkle, one of the things Harvey told me was, “Don’t get to know these people. For God’s sake, don’t go to dinner at their houses. Don’t get sucked into their personal lives. You’re going to make difficult decisions that are going to affect their lives, and you have to be impartial.” Then, about a year in, it was a super lonely job. One day, I just said to myself, I’m going all-in on this. My whole life is going to revolve around the development of this team, this company, its culture, its people. 

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We spent a lot of time working on the belief system, but I felt like I owned it. I wasn’t putting 50 people in a room to have an off-site talk about our values—these are my values, and this is my company. I can’t be the CEO of a company where somebody else created the values because then I’m already an outsider. 

One of the things we learned at Merkle is that you need to teach people why you believe the things you believe. Why do I believe business is personal? Why do I believe in clarity over certainty? Why do I believe that the customer is not always right, but they’re always the customer? What are the fundamental principles? These things drove our thinking because those beliefs will ultimately create the behaviors we want, and behaviors are the only things that actually matter. 

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I did every employee orientation throughout my time at Merkle. Even when we were a 10,000-person, global business, I did the employee orientation. I would say, “Look, you may not know what you believe yet. That’s fine. But your job as an employee is to understand what we’re saying and whether you are aligned with it or not. If you’re not, we’re going to help you find another job. That doesn’t make you a bad person; a lot of great people don’t believe the same things.” Twice, I had somebody quit in the orientation! I was trying to be so forceful in showing what we believe. You either believe these things, and you’ll feel like you belong here, or you don’t, and you’ll constantly be fighting our system—and you’re not going to win. The system is going to win every time.

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What I see as companies get bigger is that everybody wants to lose the polarizing nature of their values. Everyone wants to go to the middle. “Everybody is so happy, and we can’t offend anybody!” I think that stuff’s all bullshit. I mean, you have to be appropriate, but I think being polarizing through a strong belief system is a great thing. If you look at companies like Amazon and Netflix, they tend to have those characteristics. I also think those CEOs put those characteristics in place; it wasn’t some HR person who did those things. 

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Ultimately, I like the term you used. I think that competitive advantage manifests itself through the management system. That includes things like meeting rhythms, how you plan, how you set goals, and how your incentive systems work. Those things are really hard, and we spent a lot of time refining them over time to build muscle memory on them. One thing we always did well was communicating what we were trying to do, right or wrong. That cascading effect was really, really important and a very productive tool for us. 

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We spent a lot of time at Merkle working on the business. And the truth is, the organization fought me on it because people are really busy with their jobs. In those early days, you don’t hire people to work on the business. You hire people to work in the business, and then you have to pull them up onto the business. In those days, I was desperately trying to get the Merkle management team together for these reasons. Everybody would tell me, “We’re too busy, we’re too busy.” I said, “Okay, we’re going to have our management meetings on Saturdays. You’re not busy on Saturdays.” We did that for about seven years. We understood that we would never be the company we wanted to be unless we could figure that stuff out. 

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Candidly, my observation is that most younger companies don’t put enough energy into the management system. How do you set goals? How do you set budgets? How do you build incentive systems that are truly linked to the outcomes that you want? We always viewed ourselves as a growth company—first and foremost,  that is how we defined ourselves in the world. That set the stage, and Merkle grew every year for 32 years in a row. I didn’t care about financial crises or anything else. We were going to grow. 

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Setting that tone became an important part of the management system and the multi-year plans. I often said at Merkle, “I care a lot about the next 90 days and the next ten years.” In between that, a lot is going to happen, but I try to build a system where there’s nowhere to hide. You’re either super productive at what you do, really good, and super passionate, or you’re not. You just couldn’t survive at Merkle if you weren’t. 

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That environment was created through the management system—and how we did reviews. We had a system around reviews, like separating a financial review from a performance review, because we found that the second you combine those things for a young manager, they’re completely lost. There were hundreds of those kinds of things that we developed over time, and we stuck to our guns. It wasn’t an easy thing, but we were going to get better and get better and get better. 

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Dave: David, having worked with you, I’m going to push on you a little bit here. Everything you’ve described is a system of performance and intensity. You’re asking for a lot. You’re asking for one hundred percent accountability, one hundred percent transparency, nowhere to hide, and a lot of performance. How did you build the buy-in?

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David: I think there were a few things. Generally speaking, people want to be on a winning team. Part of my job was to help them understand what the definition of winning was and that, truthfully, sometimes you win and sometimes you don’t. Most CEOs love to talk about all the great stuff that’s going on, but when you miss your budget or lose that big customer, nobody talks about that because it’s kind of embarrassing. I think there was a certain authenticity to Merkle with our definition of success. It was very clear what we were, and we shared everything.

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I had this silly saying, “People that dream at night, whatever. It’s the people who dream during the day that you’ve got to be careful of.” We were daydreamers. I was willing to hang it out there because we were going to do this. People would say, “We’ve never done that; I don’t know… Accenture’s got 100,000 people…” I don’t care. We’re going to do this. People liked the authenticity of that, the big vision of it.

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This idea that people should think like an owner but not be an owner doesn’t make any sense to me. We were pulling people into equity positions but with no timelines. That long-term commitment drew a certain kind of person, and it created a sense of camaraderie that we’re all in this together. We all had the same class of stock. I treated those people like shareholders. I wrote them a quarterly letter; we had an actual shareholder meeting.

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The buy-in came from a strong vision, a very open and authentic culture, and recruiting people who valued hard work, dedication, commitment, performance, and meritocracy. We had a linked incentive system where, when we ultimately did exit Merkle, those people did materially better than they ever thought they would. A lot of wealth was generated.

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Dave: Most bootstrap companies that scale do one thing really, really well, and they skimp on everything else because there just isn’t external money on it. What I’m hearing is that the one thing for Merkle was the culture and the management system—and refining these habits and systems that build upon each other over a long period of time. 

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It’s less that you’ve gotten to 10x in two years and more created embedded accountability and embedded urgency over a long, long period of time. 

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David: One hundred percent. In the last 15 years of my tenure at Merkle, we cared about two things. 1) How do we become a really great company? And 2) How do we become the market leader? At the end of the day, those are the only things that matter to us.

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The problem I observe is that people spend more time trying to figure out how to serve customers than they do how to be truly a great business. It really is a balance. It’s working on the business and in the business. There’s no playbook for either one; you’ve got to find your own path.

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I agree with your last point, Dave. We grew something like 23% a year for 32 years. The compounding effect of that is very powerful in all kinds of ways. Some years were better than others; in some years, we grew 40%, and in others, we grew 13%. But at the end of the day, I wanted to grow two to three times faster than the market, period. 

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We also believed in what Bezos at Amazon calls single-threaded leadership. We liked fragmenting P&Ls. Take a person that built a big P&L, give them a really small P&L, and they’re going to build a big one again. We had something like 55 P&Ls when I left. The mentality was if you can’t grow faster than the market, you can’t be in that job. People knew that that was the expectation and that it was very real. 

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Dave: Switching gears, one thing that I think you guys did better than anyone else was understanding the power of customer data. You guys understood that the CRM is the heart of all things marketing, and you coined the term “people-based marketing” before Facebook—I still remember you guys visiting the Facebook campus and blowing their minds!

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You were also a real pioneer in a very big industry with lots of players and lots of companies with venture backing. You were the hybrid between services and tech, which the customer needed, but you were also a superior model. I didn’t want that left unsaid in covering the overall achievement.

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David: I think you’re right. We grew up as direct marketers, so we understood the power of one-to-one targeting and managing data at scale. The thing is when I bought Merkle, the word marketing never even got mentioned. They were a mailing list management company. They saw themselves as a data processing business. One of the very first things we did was pivot the business into the marketing world. Direct mail and direct marketing back in those days were growing like a weed, and we decided to focus on that sector. 

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The truth is, that world was pretty bifurcated. It’s still bifurcated—I couldn’t give you another example of somebody that has a scaled media business with a technology business. We understood that you’ve got to get both sides right, and you’ve got to be able to do them at scale, with material depth. You’ve got to be an inch wide and a mile deep in both of those categories. 

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The positive consequence of that was that it was hard to fire Merkle. If you’re a pure agency business or a pure tech services business, it’s easier to get fired because they can generally hire one person to replace you. Whereas, in most of the relationships that Merkle had, they’d have to hire at least two, maybe three, other vendors to replace the service offering. However, it was also difficult to get hired in that capacity. We learned that people don’t fire three people to hire one, either. We had to work our way into that situation, but it ended up being the secret sauce of the business.

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And for me, I liked the business, but I wasn’t trying to make it into a software company. I didn’t care about positioning it for exit multiples. We just said, look, this is a $300 billion space. Now, 99.9% of companies in the United States don’t make it to a billion dollars in revenue, so there was a little bit of concern that the odds were against us here. Like, 0.1% of people do what they set out to do. But we had a ferocious appetite for learning and innovation. At the end of the day, only two things mattered: do great work for customers and be an employer of choice for our people. Those two things will let you take share all day long. It sounds simple, but in practical terms, it’s a hard thing to do. 

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Dave: That’s awesome. Let’s talk about venture capital. Around 2010, you decided to take outside money. What and who might be obvious, given that the two of us are talking now, but tell us about that process. That was a big step after you had been building the company for 20 years.

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David: The thought process was this: it became clear to me around 2007, 2008, that we needed to break out. The digital world was upon us, and we could see the writing on the wall. We were primarily a direct-marketing shop, supporting billion-dollar direct mail credit card acquisition programs and things like that. The honest truth is we didn’t really know anything about the digital world. I knew I needed some outside perspective. 

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I also felt like I was getting a little stuck personally. I’d been the CEO of the company for 20 years and never really had a decent board. It might sound crazy, but I wanted more accountability. I had unbelievable accountability to myself and my team, but I wanted third-party validation of what we were doing and additional accountability to drive me to the next level as a CEO. 

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We had built Merkle from $2.8 million in revenue to roughly $200 million in revenue, all on $350,000. We set out—as you know—to raise roughly $75 million in a minority deal. The truth is, we probably should have done it earlier. It was really a positive experience for me. Even just my relationship with you, Dave, was a positive thing. The way you helped recruit the board, made introductions to the West Coast… I don’t know if this will make sense to people, but it became obvious during the process that we were an East Coast kind of company, and that’s not something I would have recognized prior to this. As I talked to all these East Coast people, they didn’t really bring a lot to the party—where[as] this West Coast dynamic became pretty clear. We wanted somebody that’s a little different than we are and has different networks than we have. That became important as the process progressed, although it wasn’t originally part of the thesis.

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The process itself was eye-opening. It was like, we’d talk to five people, I’d build some relationships, and we got five term sheets pretty quickly. I don’t know if you remember it this way, but I went back to everybody and said, “Tell me what your thesis is now that you gave me a term sheet.”

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Dave: No, it was more like a six-month RFP process! You asked me, How can you help me out with digital? How can you help me build professional services? How can you help me out with international? 

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Digital, I think we had a strong suit and brought on Jim Warner, who ran a big part of aQuantive to help us. Proservices, we tracked down Bob Frerichs, a killer COO of Accenture. International, I faked it. [Laughter] At the time, my prior firm didn’t really have anything international at the time. But yeah, that was grueling.

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David: It ended up being a good experience for us. I think that the next six, seven years of that journey were super productive. My original investor had been in for 20 years at that point. We wanted to get some money in his hands, but it wasn’t us trying to get some chips off the table. We took half that money to the balance sheet so we could do more M&A, etc. It was a big commitment to get to that billion-dollar goal.

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Dave: Taking outside money is not right for everybody. Why was it right for you? What did you get out of it? If you were to do this again, what are the reasons you might not take money?

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David: That’s a really good question. I think generally a few things are true: 1) I think the world has become more conditioned to raising money. 2) I think the world, in private markets, mid-market, and lower mid-market, is conditioned to these timelines that revolve around raising money—roughly five years. 3) What a lot of people don’t realize—though we did—is that by taking that money, you’re selling the company. It was just the first step, but the day we did that is the day we knew we were selling this business. It wasn’t a family business, I wasn’t passing it down to my kids, and I wasn’t going to run it until I was 90. We understood that dynamic, and we understood the timelines associated with it. It wasn’t an accident that the deal closed in 2010 because we tended to do these things in five-year increments. It wasn’t an accident that we ultimately sold the whole company in 2020. That dynamic was powerful for us because we did understand it.

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In all candor, I think that most people sell their company too early. It all comes back to that compounding idea. Everybody understands the power of economic compounding, though few people follow those rules. If you look at the economics of that compounding in the last decade of Merkle, there was massive wealth creation. At the same time, people don’t understand the power of cultural compounding. Do you want to become an acquirer of choice in your industry? It takes time to put yourself in that position. There are all kinds of other powers that go along with that as well that people don’t talk enough about.

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A lot of people are just too eager. I was a very patient person—I knew I was creating wealth, but all of my wealth was completely tied up. 99% of my net worth was in a private, illiquid business. I find a lot of people are just too impatient for that. A lot of people don’t have the patience to allow the compounding to happen, and it ultimately hurts them. When you’re young, you have time. There’s an opportunity to be more patient with that timeline. 

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I love growth capital and private equity. I really do. I love the private markets. I wouldn’t have wanted to be a CEO of a public company. But I think there are some inherent flaws in the way capital forms within those places that give people a shorter-term time horizon that I actually don’t think is really well suited to truly building a world-class company.

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Dave: Before we got on this call, you were saying that this sector of growth in private equity and ventures has made bootstrapping a less common occurrence, probably to the detriment of the founder. I think you were talking about both control and dilution. 

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David: Unless you’re in a winner-takes-all industry, you don’t necessarily need to take money to grow 100%. It’s like, what are you trying to go so fast for? I’ve seen it enable running to the wrong place faster. 

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In some ways, this idea of bootstrapping has a positive economic outcome—as you well know, at Merkle, we did 1000x our money and built a resilient business. That business is going to do around $2.0 billion this year. It’s by far the category leader at this point, without all of us, and it took 30+ years to do that. Could you have done it in 20? Probably. But could you have done it in 8? I don’t think so.

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The best time to bootstrap is in the really early years. My son is growing a business out on the West Coast. He’s been doing it for two and a half years. The first business he bought was roughly 8 million in revenue. He’s going to do almost 60 million this year and wants to do 250 million in three years. I’m like, yeah, you can do that, but you’re going to need to raise a lot more. You’ve done this pretty much with your capital at this point—why don’t you use the EBITDA now? Use the leverage; slow it down. 

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My analogy to him is you can't make a 7-year-old a 21-year-old. I mean, I don’t care what you do. You just have to go through some of this. You could end up owning 90% of this company doing a billion dollars of revenue. It will take 11 or 12 years to do it but think of the economics. That company is going to be worth a billion dollars.

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Dave: Once you get to scale and you have some real margins, you get to leverage the bigger pool of capital. 

It comes down to that personal piece, knowing that you’re ready, in n+5, n+7, n+10 years, to step away from the business ultimately. You always struck me as someone who really knew yourself. We even saw this when we were exiting—you decided to go with Dentsu, where there were a number of slightly less lucrative paths that allowed you to run the business.

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You were super clear that you wanted to exit. I was struck by how clear you were on a pretty emotional decision. How did you get that clarity?

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David: As a young person, it became clear pretty quickly that I was going to dedicate my life to growing this business. I wanted it to be big because it’s hard to be a small great company in a big industry. I was patient. I don’t think there was ever a year where I was the highest-paid person at Merkle. I was willing to sacrifice things. When I was 45 years old, I didn’t have any furniture in my living room or my dining room because I was happier to invest that money in my company and keep going.

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I also had this idea of creating generational wealth. We bought the business for $5 million. Four years later, we had an offer to sell the business for $12 million. I had a battle over it with my brother, Lance, who was in the business with me for most of my journey. His view was, “12 million bucks? We ought to take it!” And I said, “$12 million? What are you, crazy? What would we even do? [Laughs] Go try to do it again?” We already had it. Why would we go try to find something new when we already have the thing we want?

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Honestly, I also started to figure out that I was getting a little burned out as a CEO. I had been doing it for 32 years, and I wanted to experience something else. I’d like to build another billion-dollar business in my lifetime—that’s what I’m trying to do now—and I needed some runway in order to do that. All of those things sort of just came together at the right time.

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Dave: Let’s close with what you’re doing with MRE. I think it’s really interesting to go full circle.

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David: Coming back to the management system, the thesis that I’m trying to prove is, could I build three or four more Merkles over the course of the next 20 years? I think what I’ve found over the last four years is that the system is one hundred percent applicable. 

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We’re taking some relatively basic businesses in very large industries that are highly fragmented and applying a similar management system approach in running those companies. Think of sub-$50 million in revenue, non-tech, non-venture, non-healthcare—basic industry stuff. It’s like these companies lack all these fundamental skills, and when you put those things into place, you start to see that flywheel accelerate.

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I have roughly three of those today and do this with a 10- and 20-year horizon. I’m recruiting teams that understand those horizons, people that want to build something big. None of this treadmill, where I’ve got to get this done by Q3 because I’m working on this short window, and I’ve got to do a bunch of M&A to buy it at 10x and then arbitrage it at 14 on my exit. I’m not a CEO anymore, so I’m in more of this chairman role. I’m really enjoying working with teams and learning new industries and businesses. It’s been a ball so far.

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Dave: That’s awesome. And still racing.

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David: Still racing.

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