How to Make a Few Billion Dollars
The following is an excerpt from How to Make a Few Billion Dollars, by Brad Jacobs, available now from Greenleaf Book Group.
Introduction
During my 44 years as a career CEO and serial entrepreneur, I think I’ve made every possible mistake in business. I’ve overpaid for acquisitions and botched integrations. I’ve run operations for cash when I should have invested for growth. I’ve delegated tasks I should have done myself. Sometimes I’ve hired the wrong people, or made strategic bets that didn’t pay off.
And yet, my teams and I have managed to create tens of billions of dollars of value for our shareholders. This book is about what I’ve learned from my blunders, and how you can replicate our successes.
In corporate America, I’m what’s called a moneymaker. I’ve started five companies from scratch — seven if you include two spin-offs — and turned them all into billion-dollar or multibillion-dollar enterprises. My teams and I have completed approximately 500 acquisitions and opened more than 250 greenfield locations. In total, these ventures have created hundreds of thousands of jobs and raised about $30 billion in outside capital.
My career in business began in 1979, when I started a privately owned oil brokerage company called Amerex Oil Associates. I was 23 years old at the time, with just a few thousand bucks in hand and no experience. Within four years, my partners and I had $4.7 billion in annual brokerage volume, with offices worldwide.
We were the first company to arbitrage between the futures markets, based in New York and Chicago, and the cash markets in Houston, London, and elsewhere. The futures and cash markets dealt in the same oil commodities, but seemed largely oblivious to each other. As a result, the price for an identical barrel of oil often varied between the markets, so all we needed to do was buy on behalf of clients in one market, sell in the other, and make money on the difference.
We sold Amerex in 1983, and I moved from New York to London the next year to start an oil trading company, Hamilton Resources, also privately owned. Hamilton generated about $1 billion a year in revenue, and we made this money through an opportunistic combination of crude oil trading, countertrade, pre-finance, and refinery-processing deals.
In 1989, I moved back to the United States and entered a new sector, the rapidly expanding field of solid waste management. I called my new venture United Waste Systems and took it public with my team in 1992. We became the industry’s fifth-largest player, and in 1997, we sold United Waste for $2.5 billion to the company now known as Waste Management.
Over those five years, the percent increase in United Waste’s share price outperformed the increase in the S&P 500 share price by 5.6 times, reflecting a 55 percent compounded annual growth rate (CAGR). And not coincidentally, we had a 55 percent CAGR on our profit.
United Waste taught me that I love working with outrageously talented people to deliver outsized returns for shareholders in public stock markets. I believe free markets value companies correctly over the long term, so it’s gratifying to have our successes validated by Adam Smith’s “invisible hand” of free-market economics. Public equity also allows us to raise capital, create vibrant corporate cultures, and build brands on a grand scale. Personally, I get a lot of satisfaction from knowing that the shareholder value we create ultimately benefits individuals and their families who are pursuing their own version of the American Dream.
In 1997, I started a new company, United Rentals, to rent construction equipment for jobsites in North America. I took this venture public later that same year with a growth strategy that emphasized acquisitions from the start. Within 13 months, we had built the largest equipment rental company in the world and became the undisputed leader in our sector. United Rentals stock is a “100-bagger” — the share price at inception was $3.50, and it now trades at more than 100 times that price.
Then, in 2011, I was on to my next big thing, XPO Logistics. XPO’s stock became a “32-bagger” — my initial investors in 2011 made more than 32 times their money by 2022. According to Bloomberg data, XPO was the seventh best-performing stock in the Fortune 500 of the last decade — and United Rentals was the sixth best-performer over the same period.
I created XPO with a private investment in public equity (a “PIPE”) that gave me control of a logistics company with about $175 million in revenue. Its main focus was freight transportation: matching truckers with shippers, forwarding freight, and expediting urgent shipments. I felt confident we could create a business model with a major upside to earnings by applying scale and technological innovation, and we did that, building XPO into an integrated, global logistics leader.
More recently, I divided XPO into three separate, publicly traded companies as a value-creation strategy. Between 2021 and 2022, we completed the spin-offs of GXO, the largest pure-play contract logistics provider in the world, and RXO, a leading freight brokerage platform that runs on technology we developed in-house. As a result, XPO is now primarily a less-than-truckload (LTL) transportation provider — a road-freight service that combines shipments from multiple customers on the same truck to move them efficiently through a high-speed network. I currently chair all three companies, and each business is helmed by a strong CEO.
These experiences have allowed me to share thought experiments that can help you learn to think differently — an essential prerequisite to accomplishing big things. I also share how I spot big trends and capitalize on them through M&A, and I give you my thoughts on what I consider to be the biggest trend of all: the rapid evolution of technology and what it could mean for humankind. I lay out my approach for finding superhuman talent, “overpaying” them, and creating a love-vibe culture that nourishes them. And I confess my deep-seated aversion to boring meetings and share the techniques I use to make them electric.
This book is a guide for anyone who wants to achieve wealth creation through free markets or pursue their personal version of the American Dream. If you have a burning passion to make enormous amounts of money in business, or want to turbocharge your chances of success in sports, the arts, politics, philanthropy, or any other part of your life, read on.
