Willy Schlacks of EquipmentShare joins Nick to discuss Building a Construction Unicorn in Missouri, Leaving Communism for Capitalism, and How to Win a Market When Everything is a Commodity. In this episode we cover:
From Communism to Capitalism
The Philosophy of Altruistic Capitalism
Fusing Digital Worlds with the Built World
Common Company Killers from Founders
How to Build a Culturally Aligned Organization
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Transcribed with AI: Nick Moran 0:00 Willy Schlacks joins us today from Columbia, Missouri. He’s a serial entrepreneur, and he’s Co Founder, Co CEO and Chief Product Officer at EquipmentShare. EquipmentShare is a prop tech unicorn that provides the construction industry with equipment and digital solutions to improve efficiency, save money and time, as well as enhance the visibility of their assets, people and materials. The company has achieved over a billion in revenue in just seven years since its founding in 2015. And Willy Schlacks is here to tell us more about how they did it. Willy, welcome to the show. Willy Schlacks 0:32 Thank you. Good to be here. Nick Moran 0:34 Yeah, it’s a pleasure to connect. Talk a bit about your childhood, your experience growing up, I know that you’re a serial entrepreneur, and you’ve been doing a lot with your brothers since the early days. Tell us about your experience growing up. Willy Schlacks 0:44 Yeah, that is when it started. We grew up in a communistic theocracy. And the nature of those environments is fairly cloistered and different than most people experience. So as kids, the outlet that we had was really sort of satisfying our curiosity around the world with building companies in this particular economy and that was one thing that they certainly accommodated. Being a communist environment, there was no personal property. So all the money went into one pot of which seemed to make its way to the top, George Orwell was quite accurate when he said some are more equal than others. But yeah, when we were kids, we found ourselves really intrigued and wanting an outlet for curiosity. So I think it was nine or ten, when we started our first company, and was building sheds, and we couldn’t, we didn’t have any money, we would have to pre sell everything, we would go out and sort of pre-sell the product and then go and build it. And this back in the early, early 90s, we thought renting to own was absolutely brilliant, like we “Oh my God! Nobody’s thought of this, we’re gonna do this cool thing, rent our own sheds”. And, and there were a lot of people that wanted to come find out, people were happy to take a free product from kids, and they had no intention of paying. So it was not soon after that we found ourselves in the repossession business and have a lot of now they’re quite hilarious antics as a result of that. But yeah, as kids, it was awesome that we jump in, start solving problems, build stuff, and what I loved was learning, you know, our methodology was sneak out to the library, check out a book and figure out how to do stuff and then build a company around it. So we soon got into somewhere back, this is no longer a thing, but back in the 90s, building computers was an actual business that people would do. So where we grew up, there was this one phone on the property. So we would go to this phone, and we would order from TigerDirect. And we would order these parts on credit. Now, God knows how they give us credit, absolute insane but and then we would advertise and get pre sell computers and all this stuff. So in your we got a lot of exposure to just being able to satisfy our desire to learn and curiosity with our only outlet was to build companies in the environment we’re in. So the scorecard wasn’t really making money that was really important, like profit mattered, because we make profit we won, but we didn’t really ever see it, never went to us. So we as kids, we sort of grew up with, as, you know, mindset in this environment where we love building stuff and building companies. But it was definitely more than just creating wealth, because none of it actually went to us. We’re in a communist society. So none of the money went to us, it all went to the guru was totally normal to us, we didn’t really care. But looking back on that now, that’s a really interesting methodology and way to learn the value of things and developing a why behind building and solving problems. Anyway, we went on to build a bunch of companies, eventually, we entered the capitalist world, which is shocking, I was like, “Oh my God! You can actually keep the money that you make”. And it was stunning to see how so many people didn’t realize what they had like to be in an environment where you can work and build and keep that for yourself and invest it and choose, and have the freedom to choose what you want to do with it. That’s really unusual, like most of humanity has not had that experience to this degree. And even much of humanity lives in a very different environment than what you know, most Americans can appreciate. And certainly some other countries by and large, but when you look at this span of for the last 2000 years, this is pretty awesome. And I certainly had no complaints so we sort of started over again, build a bunch of companies and not the least of which was EquipmentShare. That was the first company we took adventure path all our previous companies we had you just build for the profits you make money, reinvested, build a company. But EquipmentShare was different, we knew the problem we were tackling was on a global scale. And we’d had enough experience to know that, you know, building for the profits of your business takes quite a while and it’s not difficult, but it’s just a very different path than taking a venture path. So that was our first exposure to building on a Venture Capital effectively and learned a ton, made a crap ton of mistakes but that’s alright. That’s one way the brain actually learns is when you miss predict the future, someone will say and by that time we’ve become completely addicted to learning. So That’s really drove us. Nick Moran 5:02 Just curious if you think the circumstances that you grew up in lent themselves to entrepreneurship, or do you think it was kind of innate? And you and your brother and you are kind of the exceptions within this community? Willy Schlacks 5:13 On one hand? Yes. All of who we are, is an aggregation of the environment around us, which is a combination of relational things and non relational things. So yes, who we are, is because of that, but is it better than other environments? I don’t really think so. I think the key ingredient is struggle. And we were fortunate enough to have an environment where we had to struggle, the hardest struggle is actually that actually isn’t quite true the way I state that, because the hardest struggle is the absence of perceived struggle. So the most difficult experience one could have is upper middle class ease. And when I think about my own children, I’m sort of petrified for their this upper middle class ease that they will continue to experience. And my wife is really great about artificial like manufacturing struggle. We live in this subdivision, and she’s got an entire farm in the back yard, because that’s how we were raised. That’s how we know how to, you know, you take care of animals, you collect eggs, you… having struggle is critical. But I just invalidated that statement by saying that everyone has struggle, which is true, it’s just we had the easy struggle, it was obvious, it was apparent, it was very perceived. And we were very fortunate to experience that. I think a lot of people, they have a very vivid mountain in front of them of ease. And that’s the most difficult thing to circumvent. But if you can, I mean, there’s an absolute goldmine on the other side of that. So because you have to dig deeper, you’ve got to build a why that goes far beyond just survival. And, that’s something that has greatly to be admired. And certainly some people do it but very difficult, much more difficult than what we did, which was survive, which is pretty easy. Nick Moran 6:47 You know, I’m going to ask kind of a two part question, but I’m curious what your why was. And I’m also curious, when the early days, it sounds like there was no profit motivation, because there was no profit. And so when you meet entrepreneurs now, and you get a sense that money is a motivator, and then starting their business, you know, how does that affect sort of your sense for the startup and its potential for success? Willy Schlacks 7:11 It wasn’t that money was not a motivator, it was, it just didn’t go to us. So, we would have been completely dejected and very disappointed in ourselves if we didn’t make profit in any of our businesses. And certainly, that happened, like we started a ton of companies, and they all haven’t succeeded. But yeah, some money wasn’t motivated just didn’t go as just individually. So we were completely comfortable in the environment where the money was distributed, not necessarily equally, that never happens, it did give us an interesting perspective of a socialistic environment where you produce money, and it, none of it goes to you and what that means. And it wasn’t necessarily bad. It’s just a different perspective, a different environment versus a, you know, capitalistic environment where you certainly have the ability to have the majority of that money go to you, and you choose what to do with it. And I prefer the capitalist environment, I think, when I look at the impact of different societies that you see sort of evolve in countries, but what to look at the the impact of different philosophies that lead to the way humans are organized around governments and structures, whether they’re republics or democracies, or you know, communist, socialist state, those are evolving, and they’re getting better if you look at a fairly large timeline over a linear perspective, but the ones that have the most impact, I think, are fairly modern. And when you look at countries that create wealth through control, what they do with that wealth is very different than the countries that create wealth through altruistic capitalism. And what I mean by that is, if you look at individuals who struggled to build wealth, when they get to the end of that wealth building, they then choose things to do with it. And the vast majority of them who go through that process give the majority of their wealth away to causes that they believe in and are passionate about, that generally impact humanity in a positive sense, whereas wealth that’s built in controlled environments, which is where I grew up, and there’s lip service, and there’s a narrative how this is best for everyone. But the actual outcomes of that wealth are quite neutral, or disastrous, or actually very evil. In some cases, Russia would be just an obvious example that we see on the world stage at the moment, the vast majority that wealth creation is through control and the choices that the people who control that the choices that they make, and what they do with that wealth is fairly negative compared to the wealth that is built in other countries where there is capitalistic altruistic capitalism, where the wealth is controlled by the individual who created it. It’s like the Patagonia founder who just gave his company away. I freaking love that stuff, or Bezos, Buffett. I mean, you can blindfold yourself and stab at the top wealthiest people. And you’re going to end up, if you are in that altruistic environment or free capitalistic culture environment, by and large, you’re going to end up with somebody, maybe you don’t agree with them. Maybe you don’t agree with where they put their money, but they’re putting their money in places that their purpose is to buy I don’t think humanity. So it was not that somehow we were Mother Teresa and money meant nothing. Money was enormously, like, the pain of not making profit was drove us to make profit. Because profit is the litmus of whether you succeed or fail if you’re in a for profit entity business, and that’s really the only scorecard that you’re actually creating value. And if you can’t do that, then keep learning and keep trying. So yeah, hopefully, any of those words didn’t make me come across as somehow of above, or whatever, like, no, it’s an incredibly valuable resource. And in my opinion, it is altruistic capitalism that will, in our modern year for the next 100 years transform society, which is driven by the fact that you can make money off value, anyway. Nick Moran 10:46 I think the data suggests, at least so far, that you’re likely right? You touched on this before Willy. But, what was the shift for you that took you from being a serial business builder to one that wanted to build something venture scale? Willy Schlacks 10:59 (It) wasn’t terribly intentional, it was just that with equipment share, we wanted to solve a problem that was much bigger than the commodity layer that we generally engaged in with our businesses. All businesses are commodity businesses. But the future of what we wanted to build towards was very different than the state on the commodity layer. So we wanted to develop what would be the future commodity. And we knew we needed capital for that. So that’s why we went to venture out, we have left this commune by that point. So we started at zero again, which was just as thrilling. Yeah, so capital was certainly part of the equation. But we had built a number of companies over the years after we had left, I left when I was 27, with my wife, and we had a child by that point. So we started a few more companies, but starting to zero was a very enjoyable, yet different experience. So we built companies for few years, build a few more companies. But getting to the point where we want to build EquipmentShare we didn’t had the time to develop enough capital to actually fund, you know, a global expansion of a business and a Northstar that we had. So venture got, and on that point, venture capitalism, anything, I think venture capitalists are the modern finance vehicles that also enables this transformation that we can see happen in humanity, because you have this world where there are people, again, with wealth or money, or however the structure set up that are willing to bet on founders. And that’s very different than bank environments that aren’t collateral. And I think it’s been well, I mean, it’s obvious to see the change that has occurred in the world because of that. But yeah, I’m a huge believer in venture capital, and not as a displacement of other forms of finance, but as a critical one that was, you know, certainly missing, which you can’t get to the point of how fortunate we are to live in this time. Before (when) somebody wanted to build a company, or build a product or something, you go to a bank by and large, and the bank wants to know what assets they’re gonna underwrite. And that’s quite a different experience and what we have today. Nick Moran 12:53 Right! I imagine that you had been involved in many businesses, seven plus, founding a bunch of businesses, some it sounds like we’re in the construction space, there are many different inefficiencies and problems in the sector. And in the vertical. Was the problem set clear to you from the beginning? And was the vision for equipment chair pretty well laid out from the start? Or was… Did it go through an evolution in did you kind of start, you know, with sort of a key problem and a key application? Willy Schlacks 13:22 Yeah, it certainly was clear. But it was wrong. Like all things are. So of course, it definitely evolved. But that’s just the way all things work. Like, if you’re right, then there’s nothing more to do, like, move on. So yeah, absolutely. And continues to be an evolution. But it doesn’t mean there isn’t. I think you only know what the future is by creating that strong opinion. And you are effectively trading a myth. And you figure out what is real and what is not in the future based on that. But so when we started, yeah, we were hyper focused on the asset vertical within construction, the pain point we felt was the output of resources. So whether it was machines or humans, the output had not increased since the 1940s, were virtually no increase analogous industries like manufacturing and agriculture, agriculture has increased by 1700% over the same period as far as the labor output. Construction had a nominal of that increase over the same period, so, we felt that, you know, with our businesses within the industry, and it’s not because contractors, or the industry is reticent to use tools that increase productivity, it’s actually the exact opposite. They said it’s a very complex environment, one of job based and then the variables. Whenever you build a building, or a road or any type of project, it’s always a proof of concept. Like it isn’t like manufacturing where you refine things and you’re constantly getting better within construction. It’s always new. And there was not a platform that accommodate that environment because no other industry is really like that whether it’s retail or E-commerce or you know manufacturing agriculture on and on. Most industries live in a controlled environment where you refine, you reduce defects, you reduce cogs, you refine that environment instruction is, every single job is a proof of concept and the ability to measure that is critical if we want to increase the output. So being, you know, between construction and industrials, which industrials gets a little more closer to a manufacturing environment. Even though there’s a lot of similarities, construction, we consider our market construction and industrials, just because our product and our offering really fits both. So between those two, you’ve got a $14 trillion market. And if you can increase productivity, you know, 2% per year, you suddenly completely change the landscape of the output of GDP and countries and what this world comfort is. And if you think about the problems we’re facing as humans, the first wave of innovation in the real world is always construction, it’s always a limiting factor. It’s constrained because you have the digital world. And then you have the physical world. And the more and more what’s happening is those are fused, there’s obviously been a huge amount of innovation and disruption within the digital side of that, and that will continue, but the value we get is starting to drop off. So where you see most of the value is there’s a fusion between the digital and the real world, which makes sense. Like it’s just a natural evolution of things. And if you want to leverage that expand at scale it by and large, you meet the real world of construction, like build the data center, build the road, build the apartments, build the house, and then you have whole maintenance of the fiscal world, which most people overlook, like building it makes sense, but then actually maintaining it is equally as challenging often, so that world, that environment has had virtually no increase in productivity for the last seven years. And that’s what we set out to change. Now how that changes frequently. But why, you know, is pretty that Northstar is fairly obvious to not just us, but I think most people, but the house definitely evolves. Nick Moran 16:57 Willy in such a complex environment that is custom and has so many different variables, people assets, materials, et cetera. How did you in the early days of equipment share? How did you drive fast ROI for customers and prove that you could drive value? Willy Schlacks 17:14 Yeah, well, by that time, we innately understood that every business starts as a commodity, even though very few want to embrace that. I don’t care if you’re an AI startup, or selling T-shirts, you’re a commodity, and all commodities are sold in relationship, our relationship can be formed either through, you know, humans, or a relationship with a product, whatever. But that fundamental truth, I mean, I say that I’m sure there’s people that disagree, but in my mind, I haven’t seen evidence. Nick Moran 17:41 Is that to say that there’s just no differentiation early that everything’s a commodity, or…? Willy Schlacks 17:46 It means that if you’re building a business that does offer value, very unlikely that that person is not getting that value, somehow, somewhere else, particularly in a b2b environment. Actually, I’ll stick to b2b because there’s arguments to be made. And certainly, it probably is true of everything, but we’ll stick with b2b for now. And it doesn’t matter, it doesn’t mean that you can’t de-commoditize that experience, you certainly can. But when you start, it’s very unusual to not start at the commodity layer and embracing that fact is critical to success. Many companies don’t survive because they never embrace it. They go, “Well! we couldn’t find product market fit”. It’s like, that’s the worst excuse on Earth. And that’s like the main excuse that most companies use. But did you even look at the market? Did you even look at the product? How could you not find product market fit, it’s gonna hit you in the face. Because it’s so freakin’ obvious. What is really true is that there isn’t the courage or the humility to go sell the product to the market. Nick Moran 18:39 Right! Willy Schlacks 18:39 Because it already damn exists, and everybody wants to be special and unique. And whiz-bang in their approach, they never actually offer a value to the customer. They just want the customer to see their value. So there’s a level of insecurity and I should stop. I don’t mean to bash anyone, really! Nick Moran 18:57 Oh, this is good. I mean, this isn’t perfect. Willy Schlacks 18:59 But the point being that if somebody does find themselves in a, “Oh my God! We’re struggling with product market fit”, go sell the damn product to the market, like stop trying to get the market to adopt something new, and learn about it, because then you really learn what is the value that the market needs, your customer needs for the product that you’re selling to them. Is there a reason to evolve that? Is there a reason to change it? And that is very different than what most, you know, I’ll use the word startup, even though that’s another word. But it’s definitely very different than what most startup companies are taught by, this is some of the negative side of venture capital, venture capital wants to be sold. They want to invest in massive differentiation. And if they knew they were investing in commodities, they probably wouldn’t. Reality is all their successful businesses started as commodities. And they just, you know, were hoping it was something else. So most startups usually sell a future that doesn’t exist. And that’s there’s nothing wrong with that because that is what most of the venture community wants, but the reality of product market fit is a product to the market. Now there are absolutely exceptions to that statement. But there’s also strong arguments that can push this back towards a team or a company. If they’re struggling with product market fit, then do they actually know what product the market needs and if they did then sell it. Nick Moran 20:16 Willy, when did you know that you had product market fit with equipment share? Willy Schlacks 20:19 I don’t know, within a couple of days, we had customers. So if we didn’t, we would been freaking out, like, “What the hell are you doing? If you can’t sell something”, but that’s part of learning to like, it’s not, we’re somehow brilliant, it’s just that we had a vision for what we wanted to achieve. We also were completely aware that there’s no way our customers are going to wait around for that vision to bear out and then buy from us. If we want to learn and engage with customers, then bring them value now. And that’s what we did. And that’s what we, I guess we always do at our companies. So as far as learning and how we went about achieving our vision, and we’re certainly not there, like a platform in this industry would imply 7 trillion of commerce running through a platform will work less than 2 billion in revenue, annualized. So we are a drop in the bucket incredibly small. So this is not a celebration or a victory lap. We are so freaking early it’s not funny. So yeah, there’s so much work for us to do. But I only say that because the vision that what we want to achieve has impacted the industry. And there’s a lot for us to learn of what that means. But it absolutely doesn’t mean that we can bring value now. And that’s what we achieve and attempt to do every day. Nick Moran 21:30 Let’s talk a bit about competition certainly comes up in discussions about commodities. And many and on the show citing competition as the biggest threat, you know, to business and especially within the context of venture capital, when you’re going to head to head and one company raises hundreds of millions versus another that is short funding. What would you say to those that cite competition is the biggest threat in business in, you know, what would you say is the biggest threat to success? Willy Schlacks 21:56 Yes, definitely not competition, because competition is a great way to learn. And it’s almost a cheat code. Like if you’re struggling look at the guy who’s caught. I mean, why is that bad? That’s actually great. So competition does not kill companies. What kills companies is founders and leaders. And the constraint of a company is the people within it, and not least of which in the early days as a founder, and certainly, if a leader is setting a strategy, then their ability to do that, that’s where companies die. It’s very simple, in my mind, constantly oversimplifying it, and it’s definitely an area, I’d love to learn more from people who have counter opinions. But in my mind, it’s, you know, having been through it a bunch of times, when a company fails, you learn about yourself, you know, really learn about competition, or the market or whatever. Sure, those are things that give you their symptoms, but you’ve learned about yourself. And that is the constraint of a company. Nick Moran 22:50 Perfect, you say that you’re very early, your company’s doing around 2 billion of revenue. And I would imagine that would have required you to evolve quite a bit as a leader through different phases of growth. Can you talk about that? What was your biggest growth area as a leader, and were there any ways or methods that tried to push yourself and accelerate your own learning curve as business was growing and required more from you? Willy Schlacks 23:14 Yeah, I feel insanely fortunate for the relationships I have around me, my evolution and growth is 100% of credit to them, you know, those relationships from my wife, my brother, my parents, close friends, etc. If we find ourselves as humans with relationships around us that go on a path of health, and they pull us down that path, that’s just pure fortune, and I can’t overstate how impactful that can be the relationship you have around you. So and that’s true me. So you know, going through, starting at a young age and building companies all the way up to now, yeah, that evolution, there’s been a lot and I’ve learned a ton. One of the experiences that probably encapsulates, though. I like to go to bookstores with my daughter, she’s 14 now and she loves reading and we connect a lot of books and whatever. And we were downtown once in a city and just looking for a bookstore and stumbled into a bookstore. And she was finding books and I pulled off the shelf Hegel’s Phenomenology of Spirit, it was just there and I was in the philosophy section. So, I certainly studied philosophy as a kid, which actually isn’t that viable. Most people, if you want to study philosophy, should wait till you’re 30. Like, live, then study philosophy. Anyway, so open it up and (I) was reading the preface, which is what he’s famous for, you know, the Hegel’s dialectic. And the whole fundamental thing that he was tempted to solve in most German philosophers at that point was they were trying to kind of come up with a theory of truth. Similar with Einstein to try and come up with a unified field theory. The, you know, the philosophers are trying to come up with a theory of truth, a unified field theory or unified theory that was sort of explain everything. And in my mind, he’s the closest but when I read that preface, now as an adult with kids It’s in all these experiences, it resonated in the sense that that is exactly what building a startup, a company, a team, and living, everything fits into that model that he described in the model that he describes is truth of, the perception of truth evolves. So none of us actually have sort of the key, the lock on truth, it requires kind of perspectives that requires a dialectic of other individuals, where you step into this space of equality and trust, and you absorb the other perspectives, and they absorb yours. And that evolves into something new. And I’m oversimplifying, like, go read it, people, whoever wants to like and it’s, it’s a hard read, like Hegel is a terrible writer, but absolutely brilliant in his logic and thesis. Nick Moran 25:46 Sure! Willy Schlacks 25:46 But quite a mouthful to get through. And there’s so many interesting things that we don’t have time to talk about. But that really, when I read that, now, as an adult, it’s summed up everything that I had experienced and understood and innately gravitated towards, with relationships around me, the change I experienced in myself, was not my undoing. It was the doing of stepping into an environment where there was trust. And I was able to absorb the insights, the perspective of those relationships around me, where there was a quality and trust. So if you think of product development, team building, a CEO, a worker doesn’t really matter what, if you are not in an environment where there is trust, and you can evolve your thinking, through absorption of other people’s perspectives and thinking, then you will fail, because you will grow stale. And that’s, I mean, stasis is the only point where there’s death. Like when everything stops moving, that’s when you’re done. And it’s, you know, it’s very true of our minds, and, you know, companies or anything, so, the evolution and the change is critical, that is life. And if things are not evolving and changing, then something’s wrong. Nick Moran 26:52 Yeah, love it, we have done a little research. And it seems like this philosophy kind of infuses culture to some degree. And then also startup ethos, if you have a good trusted frame, and then you keep a really open mind, you can listen to your customers, and you can evolve with them and help them achieve their goals instead of kind of to the earlier points on the show, come in with a preconceived notion of what you think they want. Talk a bit about talent, your organization has grown quite large, you’ve had to add talent at a rapid pace throughout the organization. What’s the approach with hiring? And what have you learned most about how to hire folks that are the right fit for your business? Willy Schlacks 27:33 Yeah, whatever one of the most is that we all do have strengths. And those strengths mean, we’re only good in certain areas, and a company as an organization, or an organic thing of many people, it is organic, is probably the best word that describes it, because you have to get that right. And every single company is unique. And it’s not just about finding good people, it’s about understanding where they fit, and understanding their strengths, and being able to really design for that. So I think we’re gonna keep evolving, I think in all this, and, you know, maybe it’s not 180 degree changes that we encounter. But we’re still very early in our thinking, we feel somewhat immature around this, but we have learned that is through even personality strengths. We can put somebody in a role and if they have the wrong strength profile, we know they will fail 100%. And we’ve had enough testing experience to realize that versus the role that they actually fit within that personality strength, the things that you can’t really test for are character driven, so integrity, humility, etc, those don’t come out and test those that comes out in action. And that’s where you have to build an organization of people that align with your values. The primary one for us is humility. And humility is not maybe not the right word. But that’s the word we use. What we really mean by that is the ability to absorb data and suppress your own opinion, not to the point of a sympathetic environment where you have no opinion, but a point where you can absorb, you can interact, and evolve. So that’s critical. But if that’s there, then there’s a lot of things that we’ve learned that you can, you know, through fairly simple testing, you can identify people exactly where they fit, I say, exactly, there’s always outliers, there’s always, you know, it’s organic, but by and large, you can help inform an individual where they will thrive and put them in those roles and see them thrive. And it’s humbling too because you realize that even yourself, there are areas where you would not thrive, you cannot do everything, and you have certain strengths, and you need other people who have other strengths. And that requires, again, the reason our primary value is humility and it really requires a team that shares that value, and understands where they fit, and doesn’t also mean that you can’t change or augment your strengths, but there’s definitely power in knowing where your strengths are. So we use that to influence hiring, since we hire so many people and we didn’t know that 10 years ago. Nick Moran 29:54 Is there a set of tools or standardized methodologies they use to at least surface these strengths and in capabilities? Willy Schlacks 30:01 There probably are, we build a lot of stuff in house. And that’s not necessarily the smartest thing to do. It’s just, you know, we did it. Nick Moran 30:07 What founders do. Willy Schlacks 30:08 Yeah, that is not a by and large, that’s actually a bad choice. So we made the bad choice of going in house with most of that. But it’s really most of the testing is just psychometric testing that’s based on, well, time tested, whether it’s Myers Briggs, or Disc profiling, or other ones. You just choose one that works for you, what’s more important is the collection of data around it, and really understanding how to use that to empower humans. And that’s where it’s tricky. A lot of people can use it as a negative thing. But the point is, if the test is built around understanding negative traits, those are ones that I’ve seen fail. And that’s a very slippery slope. So we only focus on the positive attributes of an individual and understand where those positive strengths will fit within roles. And then we withhold judgment on the negative side, that’s simply your actions, like who you are, you get to write that story in the future. That’s not for us to dictate. Nick Moran 30:57 So we’ve talked a bit about talent and an employee mentality, I want to talk a bit about the customers too. Maybe you have dispelled this myth earlier, based on one of your comments. But this industry that you operate in construction has a reputation for inertia and long sales cycles and high switching costs, and, you know, how have you been able to accelerate growth throughout these different stages of equipment share in an industry that has this reputation for kind of moving slowly and making decisions slowly? Willy Schlacks 31:27 The thesis behind it still goes back to the commodity layer, like I think a company needs to understand where it competes in the commodity layer, and then understand how to sell commodities. So if you’re in a product based business, well, all commodities are relationship based. So, can a customer develop a relationship with your product? And if so wonderful, you’re gonna have product driven growth, if they can, it doesn’t mean you can sell it, it just means you need a human or some other methodology to create that relationship. And early products absolutely need humans, unless you have, you know, 50 million bucks to sit around and build something until you get product market fit, which also is a very viable option, like a lot of companies have taken that path. And there’s actually no downside to it. It’s a luxury of the venture capital path, like you can get enough capital to just survive by spending someone else’s money to learn, I would get paranoid taking that path, but many people do. And they’re successful outcomes to show that, yeah, that’s totally valid, because eventually you’ll figure it out type thing, or at least one out of ten do, the other nine, sort of fail with current steps, which isn’t great. So growth, yeah, growth is critical. There’s no other option but to grow. That’s how we perceive our company. So if we’re not growing, we’re in it. We’re involved, we’re unpacking that reason that complexity, and we’re boots on the ground, if we have to, like, there’s just no other option. It’s hard without the specificity of the situation or why. But the fundamental thing is, if you’re not growing, then something is wrong, and figure it out type thing? Nick Moran 32:54 Well, it seems like there are elements to your business that were being done in various ways. For instance, the equipment part of your business, right renting equipment, and such had been done for decades, in various ways. But there were elements of your business that had not and I would imagine, that’s a lot of the visibility in the data and the platform layer that, you know, allows somebody to have real insights in real time on sites on job sites, do you still feel like that aspect of what you do fits in the commodity framework? Or do you think that that wasn’t on all of them? Willy Schlacks 33:28 It does, and only physical quantity, in the sense that the customer can still get that value through some means or method. So even our first product, when we launched EquipmentShare, the first product was fairly simple. But it was based on the thesis that when you run something, it’s something that is your fleet, it’s your equipment, you should see it and you should have the digital connection to it, all that digital connection was doing was providing visibility into that inventory. And a customer can still call somebody on the phone or go out and look at the thing and get visibility into that inventory, sometimes in a superior fashion that with a digital product can offer. So we recognize that we’re not somehow doing something that’s so transformational that nobody has ever seen. It’s like you can go out to the job site, you look at the machine, you can see who’s on it. But it also takes a lot of time. It’s fairly inefficient. And our method was “Hey! You can click on this thing and see everything you need to see about this just much faster”. It comes with other things that probably have to solve like connectivity and a bunch of other stuff. But we try not to move into the area where somehow, where we think that somehow we’re so unique in this value. It’s just that it’s better. It’s more efficient. And that’s good, because ultimately that’s our main Northstar is we want to increase output of humans based on per labor hour or month or however you want to slice it. But it’s not that, you know, when you move into particularly b2b industries, those are tight industries. There’s already huge incentive to be efficient and to solve problems with the company themself. And if you can unlock a way to do that better than that’s great. You’ve got a great product, but it’s still true. Generally speaking, I’m gonna go and say 100% of time. The majority of the time is true that they can still get that value through some mean a method that already exist and there’s a level of hubris and thinking that they can’t, because then you ignore learning from that value, like, how do they do it? How do they get that value? How can you make it better? Which seems really obvious, but that is what most products if they started with that, understand how their customer gets the value now, and instead of trying to be completely different, just augment that just do it better? So yeah, because there’s only a few times in history where there is something transformational, like with the internet, but the internet is not where Google started. Google started decades after the internet, and it certainly wasn’t the first search engine. So being the first doing something transformational generally does not mean that you’re monetizing that thing. It’s usually that you’re a foundation and decades of foundation where somebody comes along, and they go, oh, we’ll do that better. And then everybody looks at them a decade later go, “Oh, my God, they changed the world”. Yes, but they were not the first they competed at a commodity level, and they just did the commodity better. Nick Moran 36:00 Yet, here on our team, we talk about the difference between invention and innovation, we try and stay away from invention. That’s not really our domain. But we love to see people that kind of innovate and provide, you know, new methods of doing things that are already being done. Well, you mentioned before, kind of like maybe a Bay Area startup raises $50 million seed out the gate, you built your company outside of the Bay Area, Columbia, Missouri, what do you think was harder? And what do you think was easier about building a unicorn company multiple times over on the middle of the country? Willy Schlacks 36:30 I think we had the advantage of we weren’t over capitalized, we had the constraints of, you know, being in the Midwest, where there’s already a perception, expectation that you provide value, you don’t need a lot of money to do that. Honestly, raising a lot of money, certainly by the Midwest standards was probably a negative, like, that was for some we had taken that approach Venture Capital, so we’re not clear in our minds what that really meant. Like, I sound like an expert now, I was not an expert back then. It was a shit show like everything is. What we did understand is provided by either customer and grow, we did those things. We have been building companies for a long time. So we do grow, provide value, those things were obvious. But holy cow, we had so much to learn around product development, and scaling a technology company along with distribution and everything else that we did. And I love that because we learned a lot. But I’m articulating these things as if, you know, somehow the way I’m articulating is it could be perceived or infer that somehow I knew that back then, I did, this is all and I hope to have as much transformational learning over the next decade. As far as a constraints in the Midwest there but I don’t see those as a negative. I think that was good. I think we would have died as a company or certainly been more demanding huge weakness. If we had raised a lot of money, like some of the companies during 2015-2016, where there that was a bit of a bubble, another mini bubble that sort of burst in 2017. And we didn’t, so we were not over capitalized, I mean, I remember raising a small round. And at the same time, Theranos had raised on a 10 billion market cap and just realizing that they had zero revenue. And we wondered if we were doing something wrong. We’re like, Wait, is this what’s going on? I remember going to Sequoia and we were raising a beer or something and you know, chatting with them. And, you know, we’re in a corporate work with a rental company with this technology that we want to do all these things with whatever and Bird Scooter came in right after us and their scooter rental company doing whatever they had like negative 50% EBIT margins. And we had like positive 40% EBIT margins. And I just left scratching my head why they invested in Bird at a billion dollar market cap and passed on us, I was like, What are we doing wrong? So it wasn’t like I had keen insights into all this. Certainly, it was befuddling. It was like, but we, again, growth and value. That’s all we cared about at the end of the day. So even though there was weird stuff happening in the market, and certainly weird signaling from the venture community where they’re like, No, you’re making, you know, profit is not good for earn more money. There were certainly investors to advise us that “My God, we were spending way too little money”, because we were net income positive pretty quickly. And that’s all we know, if you can’t make $1 a profit than what the hell are you doing? But that did not resonate with a lot of people. And they felt we were, “Hey! you got to spend more, you’ve got to really invest”. And it did actually create a weakness in us too. Because there were times when we lean into that we took that advice, but it was, it was just too much, you know, to really make that part of our DNA. So we always snap back towards value and growth. And profit is a key metric of that for us. So hindsight, it’s easy as 2020, I can look back and sort of aggregate this is a learn ease but when you’re in the midst of it, it’s a dialectic it’s messing. You can’t see that horizon. It’s just day to day. So your values in the pursuit of learning really matter, but values to do so, not a lot of constraints that were negative in my mind from being in Columbia, Missouri. I think the constraints that I heard from investors didn’t really matter. We had one investor tell us that, you know, we can never succeed hiring people because there was no water around. I think he looked on a map and he realized where Columbia, Missouri was, he’s like, shit, you’re gonna fail, which those things really led a fire there. So we even thought we might fail. We weren’t going to fail at that point. Nick Moran 40:14 Really, if we could feature anyone here on the show, who do you think we should interview? And what topic? Would you like to hear them speak about? Willy Schlacks 40:20 Oh, yeah, sure. I can’t remember his name. But the guy who arranged it’s really interesting, it was a journalist and embarked on an adventure to sort of cover how humans, you know, obtain such impactful skills. So range is great. I mean, Ray Dalio would be freaking amazing. Nick Moran 40:37 Willy, do you have any tools or hacks that are a secret weapon? Willy Schlacks 40:40 Let’s first leadership. Yeah. Listen, if you cannot absorb and understand the opposite opinion, then you will fail. It’s very similar, like Orson Scott Card with his… Nick Moran 40:52 Ender’s Game. Willy Schlacks 40:52 Yeah, Ender’s Game, I love how the combination of the power of the child, the genius, the savant, you know, he’s just conquering this alien civilization to save humanity. And the entire combination of that is that it was only through knowing that he was able to be so tactical and achieve victory. And when he’s faced seeing the queen of the aliens, who’s represented as this horrific spider like Alien figure, which most humans would recoil from, encounters her. And it got us in this digital VR environment where he’s planets away, whatever. And he knows her so well, because that’s how he’s been able to defeat and defend Earth, that he knows her so well that he knows her motivations, he knows everything about her, and he cannot strike the final blow, because he finds out he loves her. And knowledge is love and knowing His love, and not that every interaction leads to that. But every interaction touches that like when you have the capacity to understand and absorb information and opinions that are countered your own. Yeah, as a leader, it’s critical to evolve and evolution comes through absorbing and understanding others. And if you can’t do that, particularly when there’s emotion involved, when there’s emotion involved, your brain is blind. And you need to learn to control your emotions. Emotions are powerful. It is what makes you human. But it’s also potentially what inhibits your ability to know and learn and balances the key, not, you know, swaying one direction or the other. Nick Moran 42:20 Love it. And then finally, here, Willy, what’s the best way for listeners to connect with you and follow along with EquipmentShare? Willy Schlacks 42:26 As far as connecting with me, I guess I’m on Instagram. I no longer look at LinkedIn because I just have too many messages to keep track of. So, but, happy to always come up for a chat. Nick Moran 42:36 Willy, thanks so much for your time today and sharing your thoughts and wisdom with all the entrepreneurs out there. Willy Schlacks 42:41 Nick. Thank you. Appreciate it. Nick Moran 42:42 Appreciate it. Transcribed by https://otter.ai