Guy worth $100M+ tells you the best (and worst) business to start before 2026

Here's a comprehensive summary of the YouTube video transcript, maintaining the original language and technical precision:

Key Concepts

• Business Model Tier List: A framework for ranking different types of businesses based on median success outcome, lifestyle, upside, and likelihood of success.
• S-Tier: God-tier, the best of the best businesses.
• Owner-Operator Model: Businesses that heavily rely on the direct involvement and labor of the owner.
• Recurring Revenue: Revenue that is predictable and comes in on a regular basis.
• Switching Costs: The costs incurred by a customer when switching from one product or service to another.
• Permanent Capital: Capital that investors cannot withdraw, providing stability for fund managers.
• Contrarian Investing: Investing against prevailing market sentiment.
• The Courage to Be Disliked: A philosophy emphasizing the freedom to pursue one's own path without seeking universal approval.
• Human Router: An individual who excels at connecting ideas, people, and opportunities.
• Inputs vs. Outputs: Focusing on the process and daily work (inputs) rather than just the end results (outputs) when evaluating success or feeling envy.

Business Model Rankings and Analysis

The discussion centers on ranking various business models based on a set of criteria: median successful outcome, lifestyle, upside, and likelihood of success. The tier list ranges from F (worst) to S (best).

F-Tier

• MLM (Multi-Level Marketing):
  • Description: Businesses reliant on recruiting new members rather than actual product/service sales.
  • Ranking: F-tier.
  • Reasoning: Fundamentally unsustainable, relies on finding "suckers," and often collapses or leads to legal issues. While the founders and early participants can make significant money, the model is inherently flawed. There's a high risk of legal repercussions ("50/50 odds you go to jail").

D-Tier

• Freelancer:
  • Description: An owner-operator model where an individual provides services (e.g., freelance web designer).
  • Ranking: D-tier.
  • Reasoning: A decent way to make a living, but fundamentally does not scale without significant effort to build an agency.
• Short-Term Rental Owner (e.g., Airbnb Host):
  • Description: Owning properties and renting them out on platforms like Airbnb.
  • Ranking: D-tier.
  • Reasoning: Highly susceptible to regulatory changes, which can drastically impact profitability overnight. Examples include Vancouver and San Francisco changing regulations, wiping out margins. Similar to freelancing, it's an owner-operator model with significant external risks.
• Content Creator (e.g., YouTuber, Podcaster):
  • Description: Building a following to monetize through brand deals, product launches, etc.
  • Ranking: D-tier (generally).
  • Reasoning: While top creators like Andrew Huberman can achieve A-tier status due to trust and high-margin product promotion (health supplements, etc.), the general model is D-tier. It requires constant presence and performance; if the creator stops posting, the business can cease to exist. It can be a "prison" for some.
  • Andrew Huberman Example: His success is attributed to building trust and operating in high-margin niches like health and wellness, allowing for lucrative brand deals and high customer lifetime value. He can bring significant marketing value to businesses he partners with (e.g., a Yerba Mate business that grew 300-400% with his involvement).

C-Tier

• Agency:
  • Description: Businesses providing services like web design, copywriting, social media, etc.
  • Ranking: Tentative C-tier.
  • Reasoning: Highly lumpy revenue streams ("feast or famine") and the risk of losing large clients. The business can swing between high profitability and near bankruptcy. A major risk is scaling up staff for a large client (e.g., $10 million project) only to have the client cut the budget, leading to layoffs.
  • Distinction: Metalab's success was attributed to early, groundbreaking work (e.g., designing the first version of Slack) and building a strong reputation, which is hard to replicate. Acquiring smaller agencies like Z1 to handle smaller leads from Metalab proved to be a successful "base hit" strategy.
• Marketplace (General):
  • Description: Platforms connecting buyers and sellers (e.g., Etsy, eBay, Amazon, AngelList, Twitch).
  • Ranking: C-tier (general).
  • Reasoning: Small marketplaces are extremely difficult to get off the ground due to the challenge of matching supply and demand. Highly competitive.
  • Exception (A-Tier): A successful, scaled marketplace like Airbnb, which becomes a verb and is deeply integrated into user behavior, is considered A-tier.
• Real Estate Ownership (Buy and Rent Out):
  • Description: Acquiring properties and generating income through rent.
  • Ranking: C-tier.
  • Reasoning: Offers predictability but has a ceiling on potential growth without significant capital expenditure. Innovation to increase revenue is limited compared to digital businesses. The primary benefit is wealth creation for future generations due to illiquidity.
• Local Services (e.g., Pest Control, HVAC, Handyman):
  • Description: Businesses providing services within a local geographic area.
  • Ranking: C-tier.
  • Reasoning: Difficult businesses to operate, especially for outsiders unfamiliar with blue-collar workforces. Dominating a local market through effective marketing and hiring skilled technicians can lead to success, but scaling is challenging due to limited technician availability.

B-Tier

• SAS (Software as a Service):
  • Description: Software delivered over the internet on a subscription basis.
  • Ranking: B-tier (generally).
  • Reasoning: Can be highly recurring with good margins. However, the market is becoming increasingly crowded due to AI's ability to generate software, leading to potential margin compression. Success depends on finding niches with limited competition or high switching costs.
  • Example (S-Tier Potential): Serado (DJ software) is highlighted as an exceptional SAS business. Its success stems from deep integration with hardware manufacturers (Pioneer), establishing it as the standard with high switching costs for DJs who invest heavily in hardware. This model, combined with a move to SAS, makes it highly defensible. Serado generates $45 million in revenue and $15 million in EBITDA.

A-Tier

• Marketplace (Successful, Scaled):
  • Description: Marketplaces that achieve significant scale and become ingrained in user behavior.
  • Ranking: A-tier (e.g., Airbnb).
  • Reasoning: Highly defensible and lucrative when successful. The challenge lies in the low probability of achieving this scale.

S-Tier

• Investment Management with Permanent Capital (e.g., Warren Buffett, Bill Ackman):
  • Description: Managing other people's money with the ability to retain capital long-term.
  • Ranking: S-tier.
  • Reasoning: Businesses like Berkshire Hathaway (Buffett) and Pershing Square Holdings (Ackman) benefit from permanent capital, meaning investors cannot withdraw their funds. This provides stable fee income (typically 1-2% of assets under management) and the potential for significant profit share (carry).
  • Bill Ackman Example: Manages $16-20 billion with around 50 employees, generating over $200 million annually in fees alone. He also achieved massive returns through strategic bets (e.g., $2.4 billion profit on a $25 million derivatives position during COVID). His success is attributed to permanent capital and a disciplined investment strategy, including learning from past mistakes like shorting Herbalife and betting on Valeant Pharmaceuticals.
  • Distinction from Hedge Funds: General hedge fund managers with non-permanent capital are ranked B-tier, as investors can withdraw funds, creating volatility. However, even these can become deca-millionaires over 10-15 years if they avoid significant blow-ups.

E-Tier

• Restaurant:
  • Description: Businesses involved in food service.
  • Ranking: E-tier.
  • Reasoning: Extremely difficult businesses requiring immense operational complexity and attention to detail. Margins are typically low (around 10% for successful chains). It's a "Rube Goldberg machine of business" where a million things must go right daily. It's a labor of love but not recommended for wealth creation.
• Angel Investing:
  • Description: Investing personal capital in early-stage startups.
  • Ranking: E-tier.
  • Reasoning: Viewed as akin to playing roulette rather than poker. While some angel investors achieve great success, for the average person, it's a poor use of capital due to illiquidity and low success rates. It's often driven by story rather than solid fundamentals.

Other Business Models Discussed

• Buying Local "Sweaty" Startups (e.g., Laundromats, Car Washes):
  • Description: Acquiring established, often boring, brick-and-mortar businesses and reinvesting cash flow to buy more.
  • Ranking: C-tier.
  • Reasoning: Advocated by figures like Cody Sanchez and Nick Huber. The key is to "own your own job" by being an owner-operator. If the business returns more than the owner's salary, it's considered good. This model is similar to what the Tiny company eventually adopted.
• Venture Capital/Angel Investing (as a fund):
  • Description: Investing other people's money in startups.
  • Ranking: Not explicitly ranked on the tier list, but discussed as a generally poor-performing asset class on average, similar to hedge funds, with illiquidity and lower returns than index funds for most. Top funds perform well.
• Private Equity:
  • Description: Investing in private companies, often with a strategy of improving and selling them.
  • Ranking: Implied to be a more reasonable asset class than VC or hedge funds on average, with "reasonable returns."

Key Arguments and Perspectives

• The Importance of "Permanent Capital": The distinction between successful investment managers like Buffett and Ackman and typical hedge funds lies in their access to permanent capital, which provides stability and predictable revenue.
• The "Chaos" of Business Operations: Running businesses provides invaluable experience that makes one a better investor. Understanding the operational challenges behind the scenes is crucial.
• The "Prison" of Labels and Expectations: Society and individuals often impose labels and expectations that limit personal growth and exploration. The "Courage to Be Disliked" philosophy suggests breaking free from these boxes.
• Focus on Inputs, Not Just Outputs: Envy should be directed towards the daily work and processes (inputs) that individuals enjoy, rather than solely on their end results (outputs).
• The Value of Being a "Human Router": Individuals who can connect diverse ideas and people create unique opportunities and attract interesting ventures.
• The "Don't Feed the Trolls" Mentality: When facing criticism, especially online, it's often more productive to focus on delivering results rather than engaging with detractors.
• The "Median Success Case" is Key: The ranking system prioritizes what the average successful outcome looks like, not the extreme outliers.

Notable Quotes and Significant Statements

• "If that's failing, like, sign me up." - Andrew Wilkinson, on the success of his businesses.
• "It's a business where you're either making a ton of money or you're about to go out of business constantly." - Andrew Wilkinson, describing agencies.
• "The problem with an MLM is it's reliant on recruiting other people. And it doesn't actually make money based on selling services. It's it basically makes money by finding the next sucker." - Andrew Wilkinson, on MLMs.
• "It's a Rube Goldberg machine of business." - Andrew Wilkinson, describing restaurants.
• "I think the secret to success in business is just getting back up over and over and over again." - Bill Ackman (as quoted by Andrew Wilkinson).
• "It takes 20 years to build a reputation and five minutes to ruin it." - Warren Buffett (as quoted by Andrew Wilkinson).
• "Seeking recognition is a trap. It's impossible to make everybody happy. And if you try, you're going to end up living somebody else's life." - Core idea from "The Courage to Be Disliked."
• "The only rule is that there are no rules." - Peter Thiel's philosophy for Founders Fund.
• "Be jealous of the inputs, not the outputs." - Andrew Wilkinson, on redirecting envy.
• "I think the trick is how do you figure out what you're great at and you actually enjoy." - Andrew Wilkinson.
• "What would I have fun doing 3,000 times?" - Andrew Wilkinson, on choosing content projects.

Technical Terms and Concepts Explained

• ARR (Annual Recurring Revenue): The predictable revenue a company expects to receive from its customers over a year.
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company's operating performance.
• SAS (Software as a Service): Software delivered over the internet on a subscription basis.
• LLMs (Large Language Models): AI models capable of understanding and generating human-like text.
• VC (Venture Capital): Funding provided by investors to startups and small businesses with perceived long-term growth potential.
• Angel Investing: Investment in a startup by an individual, typically in exchange for equity.
• IPOs (Initial Public Offerings): The process by which a private company becomes public by selling shares to the public.
• Market Cap (Market Capitalization): The total value of a company's outstanding shares of stock.
• Philanthropy: The desire to promote the welfare of others, expressed especially by the generous donation of money to good causes.

Logical Connections Between Sections

The discussion flows logically from establishing the criteria for a good business to ranking various business models. The host and guest then delve into specific examples and case studies to illustrate the strengths and weaknesses of each model. The conversation naturally progresses to broader philosophical discussions about entrepreneurship, personal growth, and the "Courage to Be Disliked," which are framed as essential for navigating the complexities of business and life. The final section connects these philosophical insights back to practical advice on choosing fulfilling work and creating opportunities.

Data, Research Findings, or Statistics

• Tiny Company Metrics:
  • Revenue: ~$250 million
  • ARR: $65 million
  • EBITDA: Over $40 million
  • Managed Fund: $200 million
  • Total Revenue (including fund): Over $300 million across 30 businesses.
  • All businesses in the fund are profitable.
  • Compounded earnings at 25% over the last 10 years.
  • Market cap: ~$200-300 million.
• Metalab Lifetime Profit: Hundreds of millions of dollars.
• Z1 Acquisition: Acquired for ~$300,000, generated single-digit millions in profit.
• Serado Metrics: $45 million revenue, $15 million EBITDA.
• Restaurant Margins: Typically around 10% for successful chains.
• Bill Ackman's Firm: Manages $16-20 billion, ~50 employees, generates over $200 million annually in fees. Made ~$2.4 billion profit on a $25 million bet during COVID.
• Public Companies Below IPO Price (2023): 60% of companies that went public in 2023 were still below their IPO price.
• Founders Fund Bitcoin Investment: Invested in Bitcoin starting in 2014-2015.
• Twitch Bandwidth Consumption: Was the second biggest consumer of bandwidth in a particular year.

Clear Section Headings

The summary is structured with clear headings for each tier of business model ranking, followed by sections on key arguments, notable quotes, technical terms, logical connections, and data.

Synthesis/Conclusion

The video presents a nuanced framework for evaluating business models, emphasizing that success is not solely about high potential but also about the likelihood of achieving that potential, the lifestyle it affords, and the inherent risks. While some business models like MLMs and restaurants are ranked low due to their inherent difficulties and low probability of median success, others like scaled marketplaces and investment management with permanent capital are highly regarded. A significant portion of the discussion revolves around the philosophical shift towards embracing individuality, the "Courage to Be Disliked," and finding work that is both enjoyable and aligned with one's strengths, rather than conforming to societal expectations or chasing external validation. The overarching message is that understanding oneself, embracing contrarian thinking, and focusing on the process of building and enjoying the journey are paramount to long-term fulfillment and success.