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January 14, 2025 • 1hr 1min
Just found out my neighbor’s business sold for $450M
My First Million
In this episode, Sam Parr and Shaan Puri discuss several fascinating business stories and investment strategies, including the untold story behind Muscle Milk's success, Scott Galloway's contrarian FTX investment, and Bill Ackman's bold moves during the 2008 financial crisis. They explore themes of finding opportunity in troubled situations, the importance of decisive action, and building valuable businesses through innovation and market understanding.
Just found out my neighbor’s business sold for $450M
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Key Takeaways
- The Muscle Milk Story: Built by the Pickett family into a $450M business by focusing on flavor innovation and mainstream appeal
- Value in Distressed Assets: Scott Galloway made 3x returns buying FTX bankruptcy claims when others were fearful
- The "Too Hard" Pile: Warren Buffett's approach of quickly categorizing opportunities into obviously good, obviously bad, and "too hard" to save time and reduce risk
- Running Towards Fire: Bill Ackman's $460M Wachovia investment during 2008 crisis shows opportunity in panic
- Book Summary App Success: Headway app reached $200M revenue by making complex ideas simple and accessible
Introduction
In this episode, Sam Parr and Shaan Puri discuss several fascinating business stories and investment strategies, including the untold story behind Muscle Milk's success, Scott Galloway's contrarian FTX investment, and Bill Ackman's bold moves during the 2008 financial crisis. They explore themes of finding opportunity in troubled situations, the importance of decisive action, and building valuable businesses through innovation and market understanding.
Topics Discussed
The Muscle Milk Success Story (0:00)
The episode begins with the remarkable story of how the Pickett family built Muscle Milk into a $450 million business:
- Family Business Model: Started as a "cul-de-sac company" with family members living and working together
- Product Evolution: Began with powder supplements before pivoting to ready-to-drink beverages
- Key Innovation: Focus on flavor development and making products taste like dessert
- Strategic Asset: Kept their flavoring technology separate from the main business sale
The Flavor Technology Business (9:24)
Discussion of how the Pickett family retained and developed their flavoring expertise:
- Flavor Insights: Created separate company focused on flavor development
- Technical Innovation: Built sophisticated facilities for flavor research
- Business Model: Transitioned from brand ownership to providing flavor services
- Legacy: Continue operating successful flavor house after Muscle Milk sale
Headway App Business Analysis (22:29)
Shaan shares analysis of the successful book summary app Headway:
- Business Model: Subscription-based book summaries ($12-13/month)
- Growth Strategy: Effective marketing on TikTok and Facebook
- Numbers: $200M in revenue with 30% profit margins
- Value Proposition: Making people appear smarter through condensed knowledge
Scott Galloway's FTX Investment (38:58)
Discussion of Scott Galloway's contrarian investment in FTX bankruptcy claims:
- Investment Thesis: Bought claims at 22 cents on the dollar
- Risk Assessment: Evaluated Anthropic stake and potential crypto recovery
- Outcome: Tripled investment through claim value appreciation
- Lesson: Finding value in distressed situations requires careful analysis
The "Too Hard" Pile Concept (47:17)
Warren Buffett's approach to decision-making as shared by Mohnish Pabrai:
- Three Categories: Obviously good, obviously bad, and too hard
- Efficiency: Focus energy on clear opportunities
- Risk Management: Avoid overthinking unclear situations
- Application: Works for both investing and personal decisions
Bill Ackman's Four-Hour Decision (55:18)
The story of Bill Ackman's quick decision during the 2008 financial crisis:
- Investment: Spent $460M on Wachovia shares after 4 hours of analysis
- Context: Made during peak market panic
- Outcome: Doubled investment within a week
- Lesson: Opportunity exists in moments of market fear
Conclusion
The episode highlights several key themes about business and investing:
- Innovation: Success often comes from improving existing products or services rather than creating entirely new ones
- Opportunity Recognition: Value can be found in distressed situations when others are fearful
- Decision Making: Having a clear framework for evaluating opportunities helps manage risk and save time
- Business Building: Focus on solving fundamental human needs with improved technology or delivery
The discussions demonstrate how successful entrepreneurs and investors find opportunities in various situations, whether through product innovation like Muscle Milk, distressed investing like Scott Galloway's FTX play, or decisive action in crisis moments like Bill Ackman's Wachovia investment.