Oren Klaff, author of Pitch Anything and Flip the Script, shares how to use power dynamics to master status

How can mastering status dynamics transform your negotiation success? Join us as we uncover the secrets with Oren Klaff, author of "Pitch Anything," who shares his invaluable strategies for maintaining alpha status in high-stakes negotiations. Learn how to sidestep the beta position and navigate complex deal behaviors, especially when dealing with challenging personalities. This episode is packed with practical advice tailored for healthcare executives seeking to scale their operations while effectively managing status dynamics.

Ever wondered how to level status gaps and foster genuine professional interactions? Our conversation includes a gripping account featuring Anthony Scaramucci, where disrupting the usual status dynamics led to unexpected results. Through this and other stories, you’ll discover how to avoid transactional stereotypes and build more meaningful relationships based on mutual respect. We dive deep into why mastering these status dynamics can lead to better rapport and more authentic connections.

Looking to sharpen your negotiation skills across various industries? We break down effective strategies for real estate, healthcare, and more, emphasizing confidence, reliability, and the pitfalls of retrading. Additionally, get ahead with our 2024 economic outlook and investment strategies as we explore sectoral shifts and the impact of high-interest rates. Equip yourself with the insights you need to make smart investment decisions and close deals with certainty and trust. This episode is your guide to transforming your approach to business negotiations and investment planning with expert knowledge and actionable advice.

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Transcript

Speaker 1: 0:00

If you are perceived as the lower status person in a party in a business negotiation, the other party the larger the status gap, the more they will see you at a transactional level. What can I get Not? How can I form a relationship?

Speaker 2: 0:16

The goal of this show is to help healthcare organizations scale by leveraging real estate strategies and interviewing high-level healthcare executives in order to pull out lessons learned along the way. Strategies and interviewing high-level healthcare executives in order to pull out lessons learned along the way. If you'd like a free site selection analysis from our team, or you'd like to learn more about how we're acquiring real estate through our fund on the blockchain, visit us at wwwreuniversityorg and drop us a line. That's re as in realestateuniversityorg. Hello everybody, welcome back to another episode of Helping Healthcare Scale.

Speaker 2: 0:45

I'm your host, austin, here, and I would like to welcome our guest today, oren Klaff. I've been a fan of Oren's for a long time. Alex Ramosi actually recommended that I read his books back in 2017, where I read the book Pitch Anything, which really helps me with my sales process and about creating status and the power dynamics, and so he's got a lot of wisdom to share. He has two bestselling books and I am really excited just to dive in, hear his story and share all of the great details with you guys. Oren, thanks for hopping on the show. Hey, I appreciate the invite.

Speaker 1: 1:14

Let's figure out what's going on here, Absolutely. Oh wait, you're recording that. That was just gonna be you and I.

Speaker 2: 1:18

Yeah, there's actually going to listen in, yeah.

Speaker 1: 1:21

Oh, the audience. Like you're trying to run a business and monetize stuff and make income for your family and stuff like that. That's crazy, crazy. I know Crazy stuff. You invent this. Hold on, let me take some notes. I'm asking here. I'm making money, okay, great.

Speaker 2: 1:38

I got it, yeah. So I think I just want to start out like the. When I was reading your book, I was just really intrigued about how it really resonated with me, about not being the beta, about how it really resonated with me about not being the beta, being the alpha in the situation, not being the beta. And there's a lot of one liners that I wrote down, that I try to take away and memorize, but I think, like above that, like sitting on those pillars is like your story of how did you get here. It's always so interesting when somebody tells their story of how they learn these things. Then we reinforce it so much better. And I know don't want to ruin it, like all of you tell it better, but you're working with a guy who is a jerk and so he was always doing this framing. But yeah, I'd love to have you explain it to the audience.

Speaker 1: 2:12

Yeah, you probably don't know what it is to work like with a jerk. By the way, I don't think you read right up to the last line of the book. Was a shave. Before you do, a media piece of content.

Speaker 1: 2:25

You don't like you don't like the scruff, look it's okay. So I know. But you like, the guy I worked with was a very he listens to these. So I can't just say he's a jerk. He was a jerk but I can't say he's a jerk because he listened to his having to be like. He has a challenging personality and if he worked it into it, literally everything out of his mouth would be an hr escalation. But yeah, one time I put out a ppm that wasn't numbered so he picked the next one off the pile and hit me in the head with it. But this was back in the day, way back five years ago before you, when you could do that stuff. No, but I worked with a very challenging person but I learned a lot of very sophisticated deal behaviors that I wrote about in the book, which I think really helps a million people close deals.

Speaker 2: 3:09

Yeah, yeah. I remember one of the stories just where he told one of the potential investors to roll up the PPM and shove it in his butt. Yeah, that kind of stuff. That was a fun day.

Speaker 1: 3:20

Remember those days where you're like I'm going to laugh about this in five years, but in five years you're still not laughing about it and you're like when are we going to be like two old men, austin and Orrin on a park bench? Remember when Russell told us to shove it up his butt? Yeah, I remember that. That was funny. No, it's still not funny.

Speaker 2: 3:37

Yeah, yeah, it's hard. It's hard to laugh about it when realize how much money it potentially costs you. But yeah, so a couple examples. I wanted to start off with just the idea of status, like what is status and how do you go about elevating your status? Like what's your advice for people listening? A lot of multi-site healthcare executives, people trying to scale.

Speaker 1: 3:56

Boss, big boss, let me talk over from you here. All right, let me take over running this podcast really quick. Hey guys, this is Oren Klaffff. I'm here with austin. I'll be running the show on austin's podcast. What I want to cover here today is a little bit about alpha behaviors and status. So it's an alpha behavior taking over to somebody's podcast on their show, all right, so listen.

Speaker 1: 4:16

I think a lot of people I interviewed once anthony scaramucci, the moot, and so I think a lot of people think of like alpha status is New York Italian, anthony Scaramucci, lording his Harvard degree, his Goldman Sachs pedigree, and he was in the White House, and so that's not what alpha is. So when you say, like, how do you manage status? So I know I'm going to do a podcast with Anthony Scaramucci because my my PR director organized it Somehow, she got in with his PR director, they organized and he gets on. He's not going to know me very well, maybe he's red pitch anything, maybe he hasn't. He was legitimately graduated Harvard. You worked at Goldman Sachs twice, has a billion dollar hedge fund and was in the white house. So he's going to view himself as double alpha dog and he's going to view me as whale poop at the bottom of an old sneaker. Okay, so there's a relative status going in. I didn't work at the White House, I didn't graduate Harvard and I did not work at Goldman Sachs, right? So those are. I like to think I'm above the golf valet Somewhere. I'm below that.

Speaker 1: 5:24

So we get on the call, right, and he's there and I go. Hey, ladies and gentlemen, welcome to the podcast and a guest that really punches way above my weight. I never thought I would ever get on the show and I'm just like I'm a little bit overtaken and emotional. But I'm so excited to welcome to the Orncliffe podcast Kathy West from Arkfest. And he pops up and he goes what Wait, I'm not Kathy. I go who the fuck are you? He goes Anthony Scaramucci. I'm like you are. What is that? Is that a person? What is that? Is that a noun? Where's Kathy? He's not. I'm on this podcast. I'm like like, all right, what do you do right now? This is actually. You actually did this to him. Yes, hilarious what the is going on. I'm the mooch.

Speaker 1: 6:14

And so now, in 10 seconds, I have reversed our status position. He's explaining to me who he is and I'm like why? Why are you here? He's oh, I'm gonna show you about this or that thing.

Speaker 1: 6:19

And then the mooch, and, and it took him quite a while to get control of himself. And I've done this a thousand times with guys who perceive themselves to be super alpha ego. And you've got to level status. You have to do it. There's reasons. It's not to lord over somebody, it's not to take advantage of anybody, but I'll tell you why in a moment. And so he spent a good part of that show trying to level set himself. And when you reduce somebody's status below where they're accustomed to being perceived, they do all kinds of weird things they wouldn't naturally do to try and gain their status back, because they're not used to being in that position.

Speaker 1: 6:54

Anthony Scaramucci is on. He was on CNN this morning, msnbc or Fox News, whatever, this morning because of whatever stuff is going on with the election, and so he's used to being accorded and appointed a great deal of respect and high status. So he's like at one point on the podcast you can look it up, maybe it's online, but he's taking out money and he's like showing me money. That's a really weird thing to do on a podcast and, by the way, I didn't take the pressure off of him and he's like. So I'm like what are you working on?

Speaker 2: 7:26

And this was a while ago, and so tell me that I'm going to. Nobody cares about that junk.

Speaker 1: 7:29

I'm sorry, just setting him up for failure. I go we're on the West Coast, that is all. O'neill, yeah, you're running around, you're meeting with Anthony Ordinario on these generals and guys in New York. We're on the West Coast, dude, nobody cares about that, stuff, stuff. So I even took that away from him, what he was doing and all the people who's meeting and all the stuff, and so I just I took these center poles away from him, and what I think I did accomplish through all of that is I maybe have the only true, authentic anthony scaramucci podcast, because I took away all of his crutches that he usually leans on who he knows what he did, his reputation, goldman sachs living in new york. I took all. I'm like west coast finance man, nobody cares about that. What did you do yesterday? Nobody hangs on to where you graduated from. That's nothing. Moving fast here, and so at the end of it we got off and he's who are you? This is me. I got to do stuff with you and so it's a really great way to form a relationship.

Speaker 1: 8:21

So status if you are perceived as the lower status person in a party in a business negotiation, the other party, the larger the status gap, the more they will see you at a transactional level. What can I get? Not, how can I form a relationship? Number two they will see you at a surface level. So, how you appear, whatever shoebox you fit into right, whatever class, whatever caste system, whatever how would I say it whatever stereotype you physically fall into, that's the traits you'll be ascribed. They will not go deeper below your physical presence to try and understand you as a person. So, one, they'll see you transactionally. Two, they will see you as your stereotype. And three, I would say that they would take risks around you, that they would not take around a peer. So I see this all the time.

Speaker 1: 9:12

Right, I get a call with a banker and they're in their car. Now, I have a rule set and this is status, where I don't take Zoom calls when you're in your car. There's a huge imbalance between the calls you take in your car and the calls you will take from your office. The calls I take in my car are like throwaway calls, and so it's the same thing. And how can somebody pay attention to you? Right, and they'll only see you transactionally, at surface value, and ultimately take risks around you, take calls from a car, put you on hold, check their text say excuse me and take all kinds of interruptions.

Speaker 1: 9:44

If you, if Austin and Oren, go to Bank of America for a million dollar loan and we are now at the decision committee with them in front of us, right, and the phone rings and it's a wife, a kid, partner, whatever, bridger right, we're like send a voicemail, right, we're not risking that meeting and say, hey, those guys can't focus, they're rude in the meeting and we're going to pass on this 200 million. So the stakes are high. We do not take risks in that social environment. Right Now.

Speaker 1: 10:14

If we believe somebody is lower status than us and the phone rings, we're like, hey, can you hold on a second? Yeah, I'm sorry, it's my maid, she wants to know where we put the shoe polish, right. So that's how status works. Nobody can focus on you, invest in you, write a check or believe in you, or come to a decision and do something on your timeline. If you are low status, what you'll find is they may be interested in your deal, but your timelines will be vastly far apart. Right, because when you pitch and get an agreement, you want somebody to take action right away. If you are perceived as low status, yeah, I'll do it when I can get to it, and time is the enemy of all deals yeah, it's a couple of phrases that I liked, in particular.

Speaker 2: 10:52

When you're maybe you're selling like in my situation, I had some fitness centers that I sold. Now sometimes we are raising money from investors, Sometimes we're just trying to buy, and I think even like elevating status, even when you're the purchaser, it's helpful. You have a little bit of the advantage already because you're the one with the money, but I think doing it in our way is still really important. It's just one of the lines is why okay, why should I let you buy if you're selling, why should I let you buy my business? Certainty of close.

Speaker 1: 11:17

I'm Goldman Sachs. I worked at Goldman Sachs. I've been in 250 deals. Guess how many of those closed on the LOI 249 of them. Guess why the 250th one didn't close on the LOI the counterparty died. That's it. Like we put on an LOI, nothing changes and we close, right, high status. So yeah, even when you're buying your status, how you comport your status comes into play. And I've done this to a hundred plus billion dollar funds, billionaires, large family offices, guys who you would just be like yes, sir. No, sir, really appreciate it, sir. More soup please, sir, can I have another soup? No, like you would supplicate to the like the ability of these guys to write checks. They.

Speaker 1: 11:59

What do people who have large firms, manage lots of money, always do when they come to a call with you? Who are a couple degrees of separation between your size, your scale, your ability and your status from them? What's one thing they always do? Show up late, I don't know. Show up late, correct. One thing that you can always do is go. Hey, austin, are you here for the 1004 meeting? Because let me catch you up on the 10 o'clock meeting, which was great. I'll give you a summary of that and we can start the 1004 meeting which you're here for. However you want to say it, you think like I could never. I have people say I could never be such a jerk, but I I can tell you of the oh, I don't know. I probably had 10 000 people go out and say that to someone and come back and be like that was amazing. They apologized, like it is not true. You say it with a smile, don't be a I think that's key.

Speaker 2: 12:47

Yeah, Like being polite it's if you saw it written down you'd think it's rude. But if you do it in a really fun way, like that's totally different.

Speaker 1: 12:55

There's nobody in America who thinks it's funny, cool, appropriate to show up to a scheduled call late, like they know what it's like in their business, they know what it's like in your. But you could be the lowliest low. You could be the car detail guy going, working for a billion dollar family office Right, and you're there on time. The guy comes five minutes late and he goes hey, john, are you here for the 10 o'clock detail? Because the that one is over. We're now at the 10.05 detail, which is at a different price point, and everybody go. Man, I'm so sorry, how much is it? So if you want to double, if you're a car detail and you're listing this, and you want to double your revenues just when everybody comes late because they don't respect you and, by the way, next time they'll come on time it's just we understand that in our culture, the value of time, the value of status, the value of the moral, there's things that we consider to be moral in business, right, and so whenever I see somebody doing something outside the morality center, I call it out. I own the center position, I come on time, I do what I say, I have a good reputation, my LinkedIn and who I am and my books. It all lines up. It's all in synchronicity. I don't do anything weird. The reason I do that is not so I can be Mother Teresa, it's so I can own the moral center. I outwork everybody. I'm probably under IQ everybody, but I outwork them. And in our culture the things we respect are work, promptness, pairedness, precision of language, clarity of purpose and not having rhetorical questions, not being patronizing.

Speaker 1: 14:32

Why is it so annoying when you call the bank rep? So here's the moral center for you. You call a bank rep and you're like hey, I just wanted to check my checking account. I saw a charge I don't understand. It's by lmnop, incorporated, of australia. I don't think we do business with them. And then you're the rep from bank of america goes.

Speaker 1: 14:51

So let me understand. You see a charge on your bank account that you don't understand and you'd like to ask a question about it. Yeah, that's what I said. Like why are you saying that? That's literally what I'm asking you don't patron, patronize me. This is going to take forever. So we don't like being patronized. We don't like rhetorical questions. We don't like being boxed in a corner. We don't like. We don't like tardiness, we don't like unpreparedness, I don't know, like in Papua New Guinea. That may be the hottest stuff ever, I don't know, I don't live there. But in the United States of America those are the moral values that we live in business, and so whenever you see somebody performing outside our core moral values, I call it out. I'm like John, why are you asking, why are you saying that? That makes no sense to me. I'm confused. I'm confused of what's going on here.

Speaker 2: 15:34

So if you can gain control of status and you can gain control of the frame if you occupy the center, yeah, and obviously if you're late, you're the one showing up at 10.05, you no longer have the 10 o'clock meeting, you no longer have the moral high ground and eat it.

Speaker 1: 15:49

That's the other problem. Just trying to slide in there, I obviously don't want to interrupt people who are already talking, but if I'm like hey guys, I'm here for the 10.05 meeting, could you catch me up on the 10 o'clock meeting? I can't believe I missed it. That's not regular for me, but so eating.

Speaker 2: 16:03

Yeah, I think maybe to your point about people saying that they feel too nervous or intimidated about it. It's there, so it feels it's so different from the way we normally do things, which is why it's obviously effective. But my question is is there any like in between, because this is a lot of stuff to do? Like you, you gave him a lot of technical advice on how to elevate your status, but it's almost. I see how it's overwhelming or intimidating to go from one spectrum to the other. Do you have steps people could take? Well, hold on Stop.

Speaker 1: 16:26

When you say overwhelming and intimidating, what I think in 2024 America you're going. That sounds like work. I'm sorry. I'm sorry, you have to fucking work. I'm from California, right?

Speaker 1: 16:37

Oh, I'm sorry, no, look, hold on a second, hold on a second. You said, hey, you saw my presentation from Friday, right, you liked it right. Yes, kept you in today. You watch it on the computer so lots of other things were blinking at you, lots of other things to do, and you watched it right and it intrigued you and you made some notes and points, right, I have a thousand fucking hours in that presentation and I've given it 150 times. It takes work.

Speaker 1: 16:59

Oh, you want the easy. Sorry, can you hit that? Reset, hit, restart, let. I love these metaphors.

Speaker 1: 17:09

Let's put it in easy mode. Let's put status in easy mode, right, and not play the game in nightmare mode. I understand, I think I hear what you're saying. Nightmare mode for a lot of people is getting on a call with their one opportunity to talk to a billionaire that their uncle introduced them to, and this is like the shot and it's just better to be pleasant, nice and supplicating and let's not switch the game into nightmare mode with our first chance to talk to a billionaire or whatever. So let's just put it in easy mode. So, status in easy mode. Is this not talking about the weather? Hey, how's the weather out there? I don't know you don't have fucking google, what you know. You're coming to a call with somebody in chicago. Just google weather in chicago. Right, I have 30 minutes. Okay, sorry, we'll put it back in nightmare mode like that.

Speaker 1: 17:53

So, rapport building activity I'm going to put this in easy mode. Rapport building activities, as they were described for the last 50 years in swim with the shark, in tony robbins books, in how to win friends and influence people right, those have ex. The expiration date on those rapport building activities has been reached because our society moves at a much faster pace we can. More information is available, more insight is available, and so the problem is we don't need more relationship, we need less relationships. What are you looking at? Do you have another? Are you running two webinars at the same time?

Speaker 2: 18:30

I can see your eyes moving. I'm taking notes, I'm writing all this down. Status in easy mode.

Speaker 2: 18:35

Not talking about the weather. Build rapport Win friends and influence people is expired, which is crazy to me because All right, cool. Yeah, that book Win Friends and Influence People was so insightful and I think maybe there is good stuff still, obviously. But I know what you're saying. So many people read it that it's not like it's a secret anymore, it's like mainstream, and so now we have to do something that goes against the grain of that, to shake them back into essentially get their attention.

Speaker 1: 18:58

I got invited to a conference in which they said hey, you're going to meet lots of people, get to start a whole bunch of relationships and get to meet accredited investors and you can start a whole bunch of relationships. And I'm like Susan, I don't think you understand. I'm trying to get rid of relationships, I'm not trying to start more.

Speaker 2: 19:17

I am that I do not feel like that a lot of times.

Speaker 1: 19:20

I don't. I don't want to go to more dinners. There's people in my Rolodex and friends that I have that I do not spend time with, and some of those people are like my actual family. So I need to work my territory like my actual family. So I need to work my territory. If I was a sales rep, my sales manager, who I have to be my own sales managers like, work your territory. It's so time consuming to go to a conference Like I go. Susan, what am I going to do? Hello, hey Austin, you are from. Remind me where you're from? New Hampshire, connecticut. What did I forget? I'm from Florida, whatever, all right, but there I was just set up like hey Warren, we talked for an hour. It'd be nice if you could. Oh, not only that, but it literally says on the screen Orlando, florida. So you just got it.

Speaker 1: 20:01

Hey Warren, what are you doing? Do you even have your video on? It literally says Orlando, florida. Are you here with me?

Speaker 2: 20:06

Go ahead, say it. Yeah, what do you want me to say? You want me to tell you where I'm from, or am I being the? No, you say hey, warren, like are you. Yeah, hey, warren, are you even?

Speaker 1: 20:13

paying attention to me. Yeah, that's a bit tight. I would just say hey, warren, are you here with me? I check, check. Is this mic on? It literally says Orlando, florida on my screen.

Speaker 2: 20:26

Are you good?

Speaker 1: 20:27

You need a bio. Literally says on my screen Orlando Florida.

Speaker 2: 20:30

Yeah, that's where the rapport comes in right, because again you can say the same words, that's rapport.

Speaker 1: 20:34

It's like hey, are we here present with each other? Okay, rapport is not trying to find out. Do you snowboard in Vermont or in Vail? Where do you go on vacation? Did you watch the big game this weekend? What does that matter?

Speaker 1: 20:49

Okay, what you're doing when you're doing those things is everybody knows you're searching for some kind of like connection point so you can lever it into some kind of false relationship status. The fact that your sister and my sister went to Northwestern University within the same tenure span is not a good enough reason for me to invest in your crappy low return, poorly underwritten, a high cost per door, no governance, high interest rate, no debt or leverage security. But I know the reason you're searching for that is so you can create some leverage. That is not actually the deal. Where you create rapport today is by having a high quality deal that you can communicate clearly, in the right order of information, in the right amount of information. For that call. You get a lot more rapport from doing that. At least I do.

Speaker 1: 21:43

Where people like holy crap, who are you like? Sometimes I pitch people don't know, like haven't read the book for some reason, literally go. They will literally go. Who are you? I've heard've heard that I'm like yeah, exactly. You mean like I prepared and I gave you a solid presentation within a narrative arc of the deal and I started with the big idea. That was actually an idea.

Speaker 1: 22:01

I moved into what macro economics are changing in our industry, why this deal is happening, what the opportunity is, what the key assumptions are, what the product and service is, how it's located, what the team is, what the key assumptions are, what the product and services, how it's located, what the team is, what the pro forma is, what the going in price is, what the security is, how much capital has been closed, what the use of funds are and what's happening next. And I did that all in 11 minutes in that order. That's who I am, and then they'll go. Can you do that again? We want to invite Joe and Tom. Go get Joe and Tom. Right, I'm busy. So all of a sudden went from I'm pitching up to I'm busy. Go get your friends. We'll do it one more time for you. That's rapport.

Speaker 2: 22:37

Yeah, I think, too, it might be helpful if you could walk through a couple of examples for the buyers, because sometimes our listeners are buying real estate or they're buying dental practices or MSOs or med spas or whatever it is. And so, like when I was selling, like I said earlier, like I've made it push it back on them, okay, look like why. This is my business, these are the things that we do, these are our track record, these are our numbers Like, why should I sell it to you? What about, like when you're buying, like how would you? Are there a couple different things you can say that you could advise people?

Speaker 1: 23:10

on. First of all, go, hey, I'm interested in this jeep. You're like, yeah, man, I have another couple looking at it. You're like so what sell it to them? No, like the, this is one of one, right, everything on it has learned. It's a sahara wrangler recon, two-door, red stitching on the seat belt, one of one. Each dealership gets like a half a year you won't find another one. And those dealerships have perfected this. It's no longer like they make 30 orange ones, 40 black ones, 30 red ones at the two-door.

Speaker 1: 23:39

The Sahara, like everyone, every single one has some unique something to it and it's one of one. And so you find yourself like I just bought I think I told you this a BMW m4 frozen black competition k Kith. One of one, 50. Right. So I'm like hey, what's that? And the guy goes it's the only ready, only one of one, right, it's the only used car we've ever had in our new car show. One of one. Like they're fucking amazing. Go to dealerships and just hang out there for a while, like everything is one of one. And so, from a seller standpoint, and so that puts you on your tippy toes as a buyer, right? And so that particular Kith, he goes listen, I will sell this car 27 times by lunch. We haven't even listed it yet and here's how I negotiated for it. I'll take it True story.

Speaker 1: 24:25

As a buyer, you have to be prepared to win stuff as well. When you go to an auction, an art auction or a car auction or something like that, you have to be prepared to fight for it. Because they're like why should I sell it to you? So the re. The number one reason somebody should sell to you is confidence of closing. So you have to have some pitch that goes along. Your track record of your elo close and they don't get reached. So one certainty of closing that is more valuable to a seller than anything else. Number two an loi that is not going to get retraded. So if I get to, l1 will be like this typical hey, under market conditions, subject to due diligence, we submit the price of 10 million dollars for the acquisition of abc company and subject to typical market conditions, due diligence and timeframe.

Speaker 1: 25:13

The fuck do I do with this? This is. This is nothing right. So when I put out an LOI right, it's a five pager and I go this is how I go to, I go listen, this is a real LOI with numbers in it, with a little bit of legal, this can be turned around and turned into a definitive agreement that can get. That can turn into a hard, into a definitive agreement, right with some cash up. That can be turned into a purchase and sale agreement, and so that's a lot more interesting to someone than a one paragraph loi that has no subject to diligence, subject to market conditions, subject to further discussion, versus your loi, which is a true five-pager, maybe doesn't have any more like immediate teeth, but it's something that can be, that can see more into your process and it can be flipped into a definitive agreement, which then can be flipped into a purchase sale agreement, and then you have a reputation of certainty and not retrading and then you can buy something with a lot more, probably at a lower price.

Speaker 2: 26:13

Yeah, Cause I mean that it seems like that's just standard practice these days is like, oh, we got to do a QOV quality of earnings and it's every time you go in to analyze the EBITDA it's just like slash, and so that, oh yeah, we'll give you a 7X, we'll give you a 9X, but we're going to take out all these things and just right.

Speaker 1: 26:30

So just go like this Listen, austin, I want to issue an LOI on this deal, but the LOI that I want to issue, I want it, I want, do not want to retrade it. I want us to have this relationship where this is a small market, we're going to come around and meet each other again. When we meet each other again isn't going to be like hey, I submitted an LOI and then I retraded the hell out of it and we have no trust or relationship or somebody up for sure 100. Somebody else is gonna be like hey, did you close a deal with oran? Yeah, that was a huge pain in the tuchus because he retraded it five times. He started at 50 million and rubbed me down to 28 and it was a nightmare.

Speaker 1: 27:01

Versus let's, I will issue an loi and I will issue a real loi that can be flipped into a definitive agreement. But let's do this. Give me enough information that I can scrub it down and when I issue something, it's for real. If you like to work like that's how I like to work let's do this thing properly. If you write, I'm not an LOI shop that flips them out 10 a day and then tries to retrain them down If you want a true counterparty who is there with you, not to change the price but to close. That's me. I have a reputation in doing that and the only way I can do that is let's really get in these numbers and help me understand them so I can write an offer, an LOI, that I can actually go hard on.

Speaker 2: 27:38

Yeah, it makes sense Because obviously you have to do due diligence. But the implication is, hey, once I do my due diligence and I submit my LOI, we're not going to be retrading on you, correct? And is it still? Are you still? I know that you had said moving somebody down is a lot easier than moving yourself up. Would you still advise people to have alpha status tactics even when you're coming in as the buyer?

Speaker 1: 28:02

Same thing, I think when you're coming in as a buyer. I think the way you want to set yourself up is some version of this. Hey, I'm really excited about this deal. Like stuff that looks super beta right, this is the Gucci move. I'm really excited about this deal. Like stuff that looks super beta right, this is the Gucci move. I'm really excited about this deal, austin, I love it. Honestly. We're back looking at the numbers and we're like we're gonna. This is awesome.

Speaker 1: 28:20

We just do not have another one of these gushing which even your instincts, like you're like freaking out, like why would you say that to a, to a seller? And you go. I'm, we're so focused on this right now. We we love it and we care, but also we don't care. Let me explain.

Speaker 1: 28:34

What we can do for a deal that we like is focus, get on a timeline, underwrite it, make an offer and really be present in the moment. But we also need you to be present in the moment. This is Navy SEAL buds to get a deal of this size done at the speed it needs to get done at. So if we're holding up our end of the log, you're holding up your end because we're on team to close this. I will not work harder on selling your company than you will or your asset. So if we're doing it together, look me in the eye and say, orin, we're doing this together. I will hold up my end of the log. If you can't say that I cannot be fully present. We have other things to do. But if you want to do it with me, my God, you will not meet somebody who loves this deal more. But also I hate it, right, because I love it so much. So I will push and pull right. I hate this deal because I love it so much.

Speaker 2: 29:23

Yeah, just putting visualizing myself there in that situation makes me already subconsciously think oh, like, how do I keep this guy? It's just those words that you're using back and forward. Is you create this subconscious feeling like you're pulling away? It's like here, it's right here, but I can pull it away at any second. You piss me off and I'm gone, and it totally makes the other person, the counterparty, want to be agreeable.

Speaker 1: 29:42

For the most part, yes and so the other thing I the other thing I try and do is, like in america we don't have to shave the price so tight. We have a very rich economy. A lot of this is keeping points. We don't really need the money. And we want the money because we want to do something. We don't need it for survival.

Speaker 1: 29:59

So what I try and do is I try and be super reasonable in terms of the negotiation. So what will happen is, a lot of times we'll work on it a little bit and somebody will give me their asking price, right, and if I think it's reasonable, like, I'll agree to it, because in exchange for price what I get is everything else. Hey, man, I agreed, I literally agreed to your price. I didn't negotiate a dollar. So now you, whatever you acquiesce or give up in price, you can get back in terms, right. So in venture capital, in real estate, right, you can either have price or terms, and so I like to agree to price because then I can get terms that I need.

Speaker 1: 30:41

If it's reasonable. If the asset is a $10 million asset and they're asking prices 10 to 50 or 10 million, 500, something like that, I'm like, okay, done, and then, as you get into it, they'll start to do some weird things. I'm like hey, man, you said 10, five and I negotiated. I said fine, if that's a fair price, the asset better than I do, the market better than I do, I'll agree to it. I didn't negotiate you a dollar. And then here you are on the other side doing X, y, z, l, m, n, o, p, which makes no sense to me. So if they're not reasonable on all the other things that make you money, then you're in that moral authority's position of having agreed to price.

Speaker 1: 31:21

And you can still come around on price and you go hey guy, this asset better than I do? Right, the air conditions are failing at an increasing rate. Come on, look at me, that's going to show up in diligence. You have to right and go. I want to change the price. I am not changing the price. It's your job to ask for a price that is doable. But I like to be. I like to have complete reasonability on going in as the high status position.

Speaker 2: 31:49

Yeah, and it's about the whole price and term things. That's so true. That's something that we deal with in real estate a lot because, especially right now with higher interest rates, like terms can go a really long way, like when and when. I'm talking terms, I just tell her financing, holding the note, assuming their mortgage or if you're doing residential, you've got what's called the subject to, which is not as common in commercial. But yeah, you can absolutely pay somebody's full asking if you're going to go to the bank and get a loan at 7% or somewhere between 65 and 90% of the purchase price versus they're willing to give you, they're willing to hold the note for some equity at four or 5% and they're willing to let you take over their mortgage at four or 5%. That's a big deal, right? You can afford to pay more for that same asset now because your monthly payments are going to be the same as if paid less with the higher interest rate balancing those two things.

Speaker 1: 32:33

But if you do that math up front, you just agree to the price, right. You're going to win that deal over somebody who's ankle biting both on price and terms to arrive at the same place.

Speaker 2: 32:42

Right, yeah, you got to pick and choose your battles. I want to pivot a little bit and just talk about macros. What are the time that we have left? I know you see a lot of pitches and so you're in this world firsthand Correct.

Speaker 1: 32:53

I see a lot of pitches. So what happens is I see a lot of pitches where I'm not clear that the sponsor or the seller or the CEO or the entrepreneur really understands where we are in the macro cycle and what the cost of money is. They're just like going to market trying to get the most amount for their asset with the least amount of work, which I guess is fine if you're completely selling an asset, but if you're raising money in which there is a risk, an execution risk in the deal, what I find is CEOs tend to not really understand where we are in the economic cycle, what the price, what the cost of capital is, how the cost of capital is changing, how the tectonic plates and finance are changing, what tariffs are happening in their industry, what's happening in logistics, and maybe they could answer quite pointed questions if you ask them. But they don't have a thesis. How can I invest in you if you don't have a thesis? What does Goldman Sachs, jp Morgan, bank of America, barclays, ubs, lazard, like every single investment bank and banking institution, on January 1st like? Here's our 2024 outlook. This is what we think is going to happen, why? Because who can bank with you if you don't have an outlook, right?

Speaker 1: 34:03

What sectors do you think are declining? What sectors do you think are emerging? What sectors do you think are most affected by interest rate risk or energy risk? What sectors do you think are recession-proof? What sectors do you think are sensitive in this economy?

Speaker 1: 34:17

How do you view the bifurcated economy of the consumer? Right so the top. If you look at 3 million travelers a day right now, of those, the folks that are traveling are represented in the top 70% of income earners. Right, of that top 70% of income earners, 40% of those people work in finance and real estate. Right, and then the people who are not traveling are the 50 income earners and below. And even that market is bifurcated. So what is happening? I don't know.

Speaker 1: 34:44

If you look at, if you look at petco, if you look at walmart, if you look at costco, which tends toward the lower budget, lower portion of the market, those stocks are stumbling and that so the pet stocks. So what you're going to see stumble first is who who gets thrown on the table with less food Poopsie or Jim, our son, right, so Jim gets food and Poopsie doesn't get all the glucosamine vitamins that she usually gets, and that affects the stock at Petco, right, and so does that affect your industry? How do you view those things? What is your economic thesis for the coming year? If you don't have one, it's very hard to invest capital with you, because you seem to be unaware of what's happening in the political system, what's happening in the economic system, and you are basically taking my money and you're going to be investing it in what if you don't have a macro thesis. So I think everybody has to get familiar with macros.

Speaker 2: 35:39

Yeah, you said something I think it was when we were talking earlier, just about if I could read your deal six months from now and it still makes sense. It's not good, it's not going to work. We have to create scarcity and urgency. Not inauthentic, it's got to be authentic. But it doesn't motivate people to action and to that point like there should be an element that's timely. If it's not, why are you doing the deal? If it's not relevant and timely, then chances are it's going to be a lot harder to get alpha to generate good alpha on your deal anyways.

Speaker 1: 36:09

So we're building a factory right now. What's amazing is we're financing it without institutional partners, with our retail investor connections. So a lot of the people are invested in the deal and the opportunity is. The cost of institutional capital, with the risk premium on an unbuilt factory, is preventative from anybody else building anything of this scope and scale. So we're the only ones who are able to afford land, raw materials, equipment, building engineering right now because we're doing it with basically friends and family capital. Nobody who would like to compete with us can get financing because they don't know how to operate in that market. So there's a window of time right now where manufacturing is hot and we're the only ones building. If you want to take advantage of that, come with us. If you want to wait six months, we're done. Go find something else.

Speaker 2: 37:00

Yeah, to that exact same extent. In our world it's like interest rates are high and they keep talking about how they're going to cut them. They keep pushing that can down the road. So real estate has not really. Some asset classes have suffered not a lot. For the most part, residential is high. Retail is still high. Anything outside of multifamily and office is actually doing really well, shockingly and stubbornly, which begs the question. Multifamily office is actually doing really well, shockingly and stubbornly, which begs the question. If it's doing this well with interest rates are high, what's going to happen when they're low? Right, it seems logical that they're going to go up. So we want to buy, get in and buy things like we have to do it right now and that's like an example.

Speaker 1: 37:33

I think what I would do. I think you could find it too on your side. You can go through podcasts and you can go through articles and everything like that and find any number of people who are like these rates are here to stay for a while. Get used to it. Cost of money is 12 to 14. If you're not doing something because you're waiting it to go back to the free money, everything bubble of six, seven percent, five percent. You're not getting your project done. Wake up, get used to it, move forward. That is what private equity guys are doing, that's what Goldman Sachs is doing, that's what JP Morgan is doing, that's what the advice McKinsey is giving. And if you're smarter than those guys, then you show me your deals, because I need me to go in those.

Speaker 2: 38:11

Yeah, yeah, so then it's like the same thing, get off the sideline. It's not getting any better. It's only going to get worse. Right, as more and more people get into it, more and more people get into it, more, as more people wake up to it.

Speaker 1: 38:19

wake up to this fact, yeah, and the two minutes we have left, let me try and land the plane here for people listening. What I think all of this does is you have to, as you're working with a, if you're working with a buyer or you're a counterparty seller, buyer, whoever right you're selling, they're buying, you're trying to get a deal done. You've got to have enough credibility to get this thing to a high contrast choice where you're like where you go Austin, listen, we've talked about this a lot. Right, you do this professionally and you've spent five hours on it and your team has spent six or seven. You have 14 hours in this and I know your time is $1,000 an hour. So let's just put a round number. You have $14,000 getting into this moment, right now, in either hard costs or real costs. Time is money. I have more than that as you worked on it. Send your proposal. We have docs Just on this relationship. I have 20 hours, so between us, we have 34 hours of time. I mark my time the same as yours a thousand bucks an hour. So between us, we have $34,000 getting to this moment.

Speaker 1: 39:17

Let's respect each other and just say you're a professional, you know how to do this. I've prepared everything right. If it's a no, it's a no. Let's break it clean, call it a loss. If it's a yes, then let's take the next step. You don't have to wire, you don't have to sign anything, but let's lean forward, set the next meeting and the agenda item. But I think we've both done enough work to not go I don't know that's, if it's a, I don't know with the monkey suit on. Let's just call it a no. Cut our losses. Hail fell well met, keeping the Rolodex. Come around to the next one. Would you like to go forward with me on this, or do you like to go back to what you were doing before? Yogi Berra said and I believe in it when you come to a fork in the road, take it, and here we are. What should we do? That's good, beautiful, that's good. Do you have the ability to play like on violin music?

Speaker 2: 40:03

we can fit yeah, I'll have them fix it in post okay I'm going to get the al pacino.

Speaker 1: 40:08

I want to get the al pacino soundboard, which is like the first thing I ever saw on the internet, into my studio right there.

Speaker 2: 40:12

It can't be that hard to just add it, click a button and boom go. But yeah, I know that you run a webinar too. The game of of money, so the game of money we're closed. Yeah, what can you tell our?

Speaker 1: 40:22

listeners about that. So you guys are very likely playing the game of business. The game of business is really about buying these assets, generating revenue or gross margin, selling the asset, putting some money to work, looping again, buying some more assets, having gross margin, having an operating cost, having that fall to the bottom, making some NOI or EBITDA, spinning that back around, buying more product Like what you're doing is largely a game of business. When entrepreneurs or executives, even in real estate, bump into the game of money, of banking, everything they know how to do doesn't work. These are different game boards, different players, different player modes, different economics.

Speaker 1: 41:00

Whenever I see somebody who's good at business bump into the game of money, that is when they start losing. And then they scratch your head like all my money's gone. So think about it this way, right? So many of the companies I've been involved with selling or raising money for when they finally go to sell themselves, they've worked in that company for four years, five years, sometimes seven years. The bankers who close those deals are in those deals for, say, four to six months and they make at least half as much money as the entrepreneur who's been in that deal for four or five years. Right, working full-time with all the stress, the banker makes about half as much money working on it for six months with 20 of his time. The you need. Play the and and zero risk. Bankers play the game of money. Entrepreneurs play the game of business. Neither game is better than each other. If you don't know how to play the game of money, come join me for my presentation called the Game of Money.

Speaker 2: 41:56

Or on clapcom. What's the website for that?

Speaker 1: 41:58

That is a great question, Right. The game of funnels is not a game I'm great at, Right, so you may go. Hey look, you may be good at the game of business and you may be good at the game of money, but you suck at the game of funnels. Go to Orincliffecom, register there and we'll send you an invite to the game of money. Awesome man. Oh shoot, I Believe me, we know how to do that for sure. All right, I'm going to bounce.

Speaker 1: 42:21

Very nice to see you. I'll see you again shortly. I'll look for this to come out. Let me know what's posted so we can each carry our own end of the social media log.

Speaker 2: 42:29

Let's do it, man. Yeah, thanks so much. Thanks for everything.

Speaker 3: 42:32

If you need help finding the perfect location for your practice or you're ready to invest in commercial real estate, email us podcast at leadersreecom R-E, as in realestatecom, or go to leadersreecom and fill out our form. See you next time.