Latest / Success Story with Scott Clary / David Packouz - Entrepreneur | The Real 'War Dogs' Gunrunner Who Made $300 Million Trafficking Arms

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David Packouz - Entrepreneur | The Real 'War Dogs' Gunrunner Who Made $300 Million Trafficking Arms · Success Story with Scott Clary

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  Once the New York Times created this political scandal, my mug shot and
• 0:04
  Ephraim's mug shot were on the front page of the New York Times next to a
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  picture of Rusty-looking ammunition. What are the thoughts that are going through
• 0:11
  your head when you're dealing with this whole process? I might be fucked. That's what I'm doing.
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  Today we have a truly extraordinary guest, a man whose life story reads like a
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  Hollywood screenplay but is entirely unbelievably true. David isn't just another
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  entrepreneur. From a young arms dealer who once navigated the high stakes world of
• 0:27
  international munitions to becoming the innovative CEO of a music technology company.
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  The United States was fighting the Taliban. That was where most of the stuff I worked on
• 0:36
  went. I didn't feel bad about that. I thought the Taliban are not great people and the people
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  fighting them should be supported. First thing everyone asks me is was the triangle of death
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  scene real. So the triangle of death scene was based on a real contract. We did have a contract
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  to deliver 10,000 barrettes to Iraq. Unfortunately we actually failed to deliver those barrettes
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  in real life. House arrest turned out to be one of the biggest blessings in my life.
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  That was how I launched my company's singular sound. That's kind of funny how that goes.
• 1:02
  Every single industry has its own quirks. If you have a specialty, just start with that.
• 1:07
  It'll work out. Don't stress too much. You can make more money. You can never make more time.
• 1:15
  Welcome to Success Story. I'm your host, Scott Clary. The Success Story podcast is part of
• 1:20
  the HubSpot podcast network. HubSpot has been a huge supporter of the show and I'm happy
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  Talk to me about some of the first entrepreneurial endeavors, businesses, things that you
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  tried to do growing up. I get to the place to start. Let's see. The first my first entrepreneurial
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  venture was when I was six years old. I was living in in Israel at the time in Jerusalem.
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  And I'm one of nine children. My dad was a rabbi and at very religious household. And we lived in
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  this old apartment building that didn't have an elevator and it didn't have a garbage shoot either.
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  So you'd have to take your trash down the stairs to the ground floor out to the dumpster on the
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  corner and then haul it into the dumpster. And as a little kid, you know, the dumpster was really
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  big. You know, so I'd have to like swing it and get it. And sometimes miss. And you have to do it
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  again. And so anyway, it was a big pain and the dad worked. Yeah. He really did. He really
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  put us to work. And so I remember there is one day my I was playing Legos with my older sister.
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  And my mother, who was like cooking in the kitchen, she asked us to take the trash out. And we,
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  you know, as little kid, my old my sister was like a year and a half older than me. So she was
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  about seven. And she asked us to take the trash out. And we're like, oh, we don't want to take the
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  trash out. And we want to play Legos. And she got annoyed at us. And she's like, I asked you to take
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  the trash out. My dad hears a commotion. He comes by. And she's like, they don't want to take the
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  trash out. And my dad says to us, he's like, you guys are looking at this all wrong. This, you
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  think this is this big hassle, you know, but really, this is a big opportunity for you. And we're
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  like, what are you talking about? How's taking the trash out an opportunity? And he says, well,
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  think about it. All our neighbors, I bet they don't want to take the trash out either.
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  So all you have to do is go to all the neighbors and offer them a service. You can take out their
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  trash. People don't take it out the trash every day. So every other day, maybe three times a week.
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  And you could charge them, I don't know, maybe, you know, a quarter a week. It was a shackle in
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  Israel. It's worth about a quarter. And we're like, oh, that's a great idea. We're going to make
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  money. And he's like, yeah, it is a great idea. Well, now, why don't you practice and take your
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  mother's trash efforts? You're that smart. He's there because there's no arm. He's very smart.
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  And so we went to all the neighbors and we offered them the service and we, I think we signed up
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  eight neighbors to for the service. And we used our mother's like, she had a big like this big
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  cart, this like wire cart that I think she would put groceries in or something. And we'd have to,
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  you know, put the trash in the thing because we were too small to like take the trash out just
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  on its own. And we'd have to like take the cart down the stairs and go,
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  cachunk, cachunk, cachunk, the wheels down the stairs. And then at the end of the week,
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  we went to our town and we're like, you know, this is way too much work. This is so much work.
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  It's not worth a quarter a week. And my dad said, well, what if you got paid twice as much?
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  Would you want to do it then? And we're like, wow, twice the money. That would be worth it.
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  And he says to us, he was like, well, then just tell the neighbors that you raised the price.
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  And then now it's 50 cents a week. And we said, but we can't tell the, we can't just double
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  the price. We just said last a week ago is a quarter. This is, well, you don't raise the price.
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  You're going to quit anyway. So you might as well give him the opportunity to pay what, you know,
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  what what you think is worth to do the service for. And so we went to all the neighbors.
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  And we had one neighbor who who only one neighbor canceled. And from then on, we saw their
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  daughter take out the trash, which we've never seen before. They didn't get to realize why we
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  paying the neighbors kids to do this. We have a perfectly good kid of our own. And one neighbor
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  complained, he's like, he's like, what a, you can't just double the price. Maybe this week,
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  you put it up 10 cents next week, you put it up five cents, double, this is crazy. You know,
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  and we're like, but we stuck to our guns. And he's like, okay, fine, fine, fine, fine. And he,
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  he paid it. And so, um, so yeah, so that was my first business. I built up, um, probably like a few
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  hundred checkers over the course of a few. How old were you again, sir? When you was about six
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  years old. Yeah. Like from the get go. Yeah. And, and your dad, your dad was a rabbi. So he was
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  a very, very religious. Yeah. But when I listen to your sort of your origin story, uh, you can talk
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  about why you chose not to become religious and to sort of like go down that path. But also,
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  he wanted you to become religious. And when, when you said like, was, and this is not for me,
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  pushed you towards, I pushed you towards more traditional, uh, like safer careers. And I'm curious
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  why, why would a parent at a young age who can encourage you to be so entrepreneurial,
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  then when it actually comes time to like figure out your life and career, why is he like go be a doctor
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  or a lawyer? Uh, I think there's a large element in the Jewish community of like traditional, uh,
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  safe career, career paths. Yeah. There's, there's a lot of, a lot of doctors are Jewish, a lot of
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  lawyers are Jewish. Um, and I think there's just a large element of, uh, I think the history of
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  the Jewish people is that, at least the Ashkenazi Jewish people from Europe, um, is that we weren't
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  allowed to own land. So the only thing you could take with you is your education. So there was always
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  a very large, uh, pressure to have high education that could translate into a business because when,
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  you know, they come and try to kill us all and you run away, uh, you know, you can't,
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  you can't take the land with you. So, so that I think that's where it started culturally.
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  That makes it. And that's something that obviously like your dad, your, your dad felt and believed in.
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  And then I mean, it's always interesting like family dynamics. So he did prompt you to be entrepreneurial.
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  Um, and obviously that's ultimately where you ended up. But like other elements of your child,
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  it likes maybe even speak briefly about, because you spoke about religion and why you chose not
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  to be religious and how like even like Jewish culture maybe influenced you as you grew up.
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  Yeah. Yeah, if it better or worse. Yeah, absolutely. I mean, everything has good and, you know,
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  bad things to it. Um, so the, for people who don't know the Orthodox Jewish community is, um,
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  pretty intense. And, uh, I, there's a very, it's pretty much the highest calling in life in that
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  community is to study Bible and religious books all day, uh, particularly the Talmud,
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  which is this enormous body of, uh, work that kind of goes into the nitty gritty details of what
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  the Bible all means and what all the rules and how all the details of the rules and all the
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  corner cases and, and so, and it's like a very complex law text is what it is. And it's written
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  in Aramaic, not even Hebrew, which is like an old dead version like relation to Hebrew linguistically.
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  Um, so I spent many, many years way more than I wanted, uh, studying the Talmud in Yeshua,
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  in Yeshua. Yeah. It's an all-boy school. Didn't meet a girl that wasn't related to me until I was
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  like 17. It was very traumatic, very traumatized. It was very, very awkward as, uh, as a young guy.
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  But, um, but I think the, uh, the advantage of that was that I learned to really grind for many
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  hours at a time on things that were not particularly interesting. Yeah. And tuition is no joke.
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  Yes. Exactly. Like, I, I, I have friends that are, are especially in Toronto. We don't know
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  as many connections down here, but friends that were orthodox in Toronto, orthodox using Toronto.
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  And I can't remember the exact hours that I never really paid attention. I must have done kids.
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  But like, their average school, like, starts way earlier and goes way later.
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  So, yeah, so my, my schedule during high school was, uh, we'd get to school at 730 in the morning
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  to pray. Then we'd eat breakfast and then we'd study Talmud until like lunchtime. And then
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  after lunch, we'd have our secular subjects until dinner time have dinner and then do more studies
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  of more religious studies. Do our homework, go to sleep, wake up and do it again. So it was like,
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  they, they designed it so that you would not have any free time specifically so that you,
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  I went to school right on the edge of South Beach, right? So like, literally a few blocks walk
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  was all the parties and all the clubs and everything. And I was in my button down white shirt and
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  my black hat and, you know, my, my sideburns, you know, coming down. So, uh, you were super
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  religious. I was very religious. Yeah, I'm not by choice, but, but, uh, but yeah, it was, uh, it was
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  a real night and day kind of cultural difference. And then so talk to me about that. So, uh, I think
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  that even, um, choosing to move away from being so religious and, and, and so strict, that also pushed
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  you into different jobs and different avenues to talk to me about that. Yeah. Um, so,
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  I'm one of nine children. As I mentioned, I'm third from the oldest and my older two siblings
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  remained religious. So it was, uh, when I started doubting the religion and started, uh, uh,
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  kind of giving indications, I didn't want to leave the religious lifestyle. Uh, my parents freaked
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  out because they were like, oh, it's kind of the first two worlds. It's the first. Yeah, exactly.
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  He's going to be a bad influence on the other children and they were right about that.
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  You know, uh, it weren't wrong. Out of my six younger siblings, five of them became our religious.
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  So I'm very proud of that. I led them to freedom. So a freedom of the mind. Um,
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  so yeah, they pressured me a lot to, uh, to remain in the religion after high school. They
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  wanted me to go to Israel to study the religion. They're like, oh, you, you know, this is your
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  mortal soul on the line. Don't you think you should take at least a year to find out whether it's
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  true? I'm like, okay, fine. You know, so I went to Israel for, actually ended up staying for two
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  years. Um, but then I went to college and, uh, took a general anthropology class and I realized
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  that everything they taught me was just not possible. Day, you know, it was not because, I mean, the,
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  I'm not saying everything is bullshit, right? Uh, there's plenty of wisdom in, in all religions,
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  right? Um, and, uh, and if they want, I respect people who want to leave, live that lifestyle,
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  it's everyone makes their decisions for themselves. But the claim in Orthodox Judaism is that
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  the Bible is literally true, right? You know, God created the earth six, five thousand seven hundred
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  whatever years ago and, and, uh, you know, in six days and, you know, the earth was made before
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  the sun and it just, it, it goes against science, all of science, not just like one element of science.
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  And so when I went to and took a general anthropology class and I learned how, how they date fossils,
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  how they track the divergence of languages in you and populations and how genetic diversity is
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  tracked and how we know that the Native Americans have been here for at least 20,000 years and
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  Chinese culture has been around for five thousand years and wasn't wiped out in a flood, you know,
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  and like four thousand years ago. So the flood, no as flood never happened. It just never happened.
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  Either all of science is wrong. Like every single branch of science, the radio carbon dating,
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  archaeology, linguistics, genetics, like, yeah, holy different types of science. They have to
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  all be wrong or the flood just never happened the way it says it in the Bible, just, just didn't.
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  So when I took that class, I realized I'm like, there's no, I mean, because I kind of went back
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  and forth throughout my teens because I was really into reading science fiction and science fiction
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  tends to be pretty skeptical about religion. Um, but when I finally learned how the science is
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  done, I realized there's no way that science could be true and this could also be true,
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  the way they portray it. So that was the final nail in the coffin, so to speak. Do you think that
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  do you think that sort of that realization, um, push, like not just pushed you down,
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  like entrepreneurship and building your own thing and, but did it push it away from what your
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  parents wanted for you completely, not just religion, but doctor, lawyer, like everything they
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  envisioned for you. I'm just that's so fascinating because you want to complete 180. Um,
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  and I wonder if it was like that was part of it. It was like everything that my parents
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  stand for and everything at the time, like it's, you know, now I'm sure the relationship has changed
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  significantly, but at the time was that sort of the, um, inflection point that pushed you down
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  the path that you're on? I didn't really reject the traditional route so much because I,
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  I was in, I did go to college and I was studying chemistry, um, and mainly because everyone said,
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  oh, if you want like job security, get a degree in hard science, right? And I was pretty good at math,
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  so, uh, in science, I always did very well in school with that stuff. So I figured, well, if I can,
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  most people can do well in that and I can, I might as well, uh, study that. Um, but it was,
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  but I've always been doing entrepreneurial ventures on the side. So like while I was in, in, uh,
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  in university, um, I started importing SD cards from China to, uh, to sell on eBay.
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  This is not government contract. No, no, this is before I got, this is actually how I got into
• 15:17
  the government contract later. Um, I started selling SD cards. I started importing bed sheets and
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  towels from Pakistan to sell to nursing homes and hospitals here. So your mind is always thinking on
• 15:30
  planar. Yeah. Well, it was, it was different opportunities that arose. So I'll give you a very
• 15:33
  brief of how I got into each of the, because they're so random, you know, they're very, right?
• 15:37
  They're very random. Yeah. So the SD cards I got into it because I bought, uh, at the time,
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  like digital cameras were becoming a big thing, this early 2000s. And, uh, the SD cards were super
• 15:47
  expensive at the time. And, you know, I was always looking for a better price and I kept
• 15:52
  on searching for a better price and the better, the only good prices that I found was if I bought
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  like a hundred of them. And then, and so I had to buy a hundred of them. Like, you know, this is
• 16:03
  such a good price I could sell the rest of the money. And so I initially just tried to buy one
• 16:07
  for myself, but then I realized this is a business opportunity. Exactly. And so I started selling that
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  and that there's a great business because SD cards are tiny and easy to ship and don't take
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  a much room. And then I spoke to a friend of mine who I met in Israel and he was, uh, he was doing a,
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  a medical supplies distribution business in the United States, his dad owned a nursing home.
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  And that's how he got into it. So, but he told me he's like, you know, I told him about the SD
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  card business. And he was very impressed. He's like, oh, that's awesome that you found suppliers
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  overseas. Um, you know, I buy all my stuff from distributors in the United States, but I know
• 16:44
  they buy it overseas. So if you could find me a supplier overseas, I'm happy to buy from you instead.
• 16:49
  If you beat my distributor's prices. So I started researching it and eventually found a good factory.
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  And that's how I got into the bedsheet and towel business. Uh, and so yeah. And that's, and that's
• 16:59
  kind of how I got into government contracting because my partner, uh, my former partner,
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  Ephraim, uh, when he heard about my businesses, when I met up with him, he was like, oh,
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  that a lot of stuff you're doing, similar to what I'm doing, searching for suppliers overseas,
• 17:13
  arranging logistics, doing the paperwork and you would never met him. Yeah. You could have built
• 17:18
  a very lucrative business. Yeah. Out of all of these. Yeah. Yeah. Importing from overseas.
• 17:23
  I was well on my way at the time. Yeah. So I mean, so when you, when you, where did you meet Ephraim?
• 17:27
  Well, we first met when, uh, in our, when we were both in our teens, he's actually four years younger
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  than me. So I think I was like maybe 16 and he was 12 and, uh, our families went to the same
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  synagogue. So, uh, that's how we, and neither of us like to pray. So we'd sneak out during prayers
• 17:43
  and we'd go hang out like on the basketball courts and stuff. And that's kind of how we, we met.
• 17:48
  Um, when he was, uh, I think when he was 16 years old, he got kicked out of his, we both went to
• 17:54
  private Jewish schools, orthodox Jewish schools, but we went to different ones. Um, he got kicked out
• 18:01
  of school for smoking weed. He got caught smoking weed there. They took that very, back then they
• 18:05
  thought it was the same as heroin, you know, a smoking weed, you know, that is. So they're all
• 18:08
  you're going to end up on the streets and you're going to train. They still, they still kind of do.
• 18:12
  I mean, I'm, I'm panadian. I can't, you can actually just buy weed anywhere. But yes,
• 18:17
  it's a little bit different in some states. Miami starting to relax about that stuff there,
• 18:21
  you can actually buy weed, you know, quite a few places here now to legally. Um, I feel like
• 18:26
  liquor is probably a little bit more, more, uh, dangerous for some people than weed. But yeah,
• 18:31
  a little, yeah, yeah, uh, oh, yeah. So yeah, trouble. You got trouble. So he got into trouble for
• 18:37
  smoking weed, got kicked out of school. And so they told him, hey, you know, if you're not going
• 18:41
  to respect the rules of the school, you're going to find out what life's really about and you're
• 18:44
  going to join the workforce. And so they, they said to him off to work for his uncle who on this
• 18:49
  big pawn shop and a warehouse in South Central LA. Um, and his uncle realized he was a good
• 18:55
  talker. So he put him to work as a salesman in the pawn shop. And as a 16 year old boy, he got
• 19:00
  obsessed with guns, you know, like, say, you know, teenage boys, any, any zero guy. Exactly. Yeah,
• 19:06
  they either get obsessed with guns or sports or guitars, you know, that, you know, cars, right?
• 19:11
  Those are the four major things. I think that teenage guys get obsessed with. I wasn't to
• 19:15
  guitar as I was a musician. Yeah. And he was a gun nut. So, um, so he got obsessed with guns.
• 19:21
  He started selling the guns in the store. He's, uh, his uncle was doing government contracting,
• 19:27
  you know, bidding on mostly local and state police contracts to sell guns to the local and
• 19:32
  state police. And so he taught F from how to, um, bid on the, on the government contracts,
• 19:39
  how to work the government contracting system, worked for his uncle for about two years,
• 19:44
  until they had a falling out. Each claim, the others screwed the other. They're both terrible
• 19:48
  people. So, you know, I don't look out of aisle. As a, yeah, for real, for real. I think that's where
• 19:53
  he learned his, his kind of sneaky business tactics. And probably, I mean, that's what he worked
• 19:57
  with. And his, his grandfather also is notorious for this. His uncle's father. Yeah. Yeah.
• 20:03
  It's not the entire family because it's, it's interesting because, I mean, his dad who's not
• 20:09
  related to his dad is, it's his, his uncle is his mother's brother. So his dad is a super sweet
• 20:15
  guy, like the complete opposite of him. And yes, it's really interesting. But his grandfather is a
• 20:22
  real, was a real estate billionaire and owned like enormous amounts of South Central. He was a
• 20:28
  slum lord. And, uh, he gave his one of his sons, uh, Ephraim's uncle, uh, uh, property to set
• 20:35
  up the pawn shop in. And so that's kind of how that whole thing started. Um, but his grandfather's
• 20:41
  notorious also for, uh, kind of sneaky business tactics. Like it's not just slum lord is like less
• 20:47
  than less than above board. Okay. Just, uh, just to give you an example. Um, so his grandfather got
• 20:53
  into the, into the media by, um, because he'd been married to his grandmother for about 40 years.
• 21:00
  They had like eight kids together. And after about 40 years, she decided to divorce him. He's
• 21:06
  this old school Iranian guy. So, you know, I, who knows for the reasons, you know, but, um, she
• 21:13
  decides to divorce him. And it turns out that she was never married to him legally. He had just
• 21:20
  married her in the synagogue. So he didn't, there was no legal, like in the state of California.
• 21:26
  Um, he, and so she, when she, you know, tried to get like, Alimony, because all her kids were
• 21:32
  grown up, say, well, she wasn't going to get like child support. Um, he offered her zero dollars.
• 21:37
  And he was a billionaire. And he was like, you get nothing. And so she had to sue him. She sued
• 21:42
  him for like $700 million. This is the biggest Alimony lawsuit in like history. Um, I think they
• 21:47
  eventually settled for a tiny fraction of that, but still, but they go to show the kind of person,
• 21:52
  kind of versillionaire would give the wife of his eight kids, of his eight kids, like a dollar,
• 21:56
  a dollar. Exactly. So that's, that's the kind of, uh, family. You know, we didn't have, you didn't
• 22:01
  have a chance. Yeah. Yeah. Well, he, not all his siblings aren't like him. So it's not like,
• 22:05
  I'm not saying they're all like that. His siblings are actually really nice people. I know them,
• 22:09
  you know, um, he's, he's a special case. It's, it's interesting because like, I think it,
• 22:14
  there's like a certain characteristic that runs through the family, but it doesn't get to everybody.
• 22:19
  So like, he was, I honestly, I'm not like a licensed mental health professional or anything
• 22:25
  like that. But, uh, from everything I've read about, uh, sociopaths, he fits it to a T. Like,
• 22:31
  he doesn't like, he doesn't have any, uh, any empathy for people. And I'll give you a really
• 22:36
  funny story that kind of kind of fun. I've heard this as well that like the, the, the Jonah
• 22:40
  Hill portrayal is actually like very nice. He, Jonah made him look a lot nicer and then he was
• 22:46
  in real life. Yeah. But I'll, I'll give you a story of, uh, kind of his mindset. So we at the time,
• 22:52
  uh, uh, we had a friend who was addicted to heroin and was doing, was very depressed. And,
• 22:59
  you know, he had been, they corrected a few times. So like, we were really worried that he was going
• 23:04
  to kill him. So, and, um, we were all discussing. It was a group of us, you know, childhood friends
• 23:09
  who, including Ephraim, who were there and we're discussing, uh, our friends issues. And he,
• 23:14
  and Ephraim says, wait a second. Wait a second. You're telling me he's addicted to heroin and he
• 23:17
  suicidal. Oh, I've great idea. We're going to get a, a life insurance policy on him. And then we're
• 23:25
  going to anonymously send him a bunch of drugs. Oh, this can't fucking fail. And we were like,
• 23:30
  dude, you are a piece of shit. That's fucked up. Yeah. Yeah. I was really keen. He was joking,
• 23:35
  but like, not joking. Yeah. He was kind of happy. He never actually did it that we know of.
• 23:39
  But I guess you also don't make jokes like that. That's like this. Yeah. Exactly. It was, it was
• 23:43
  too hard. We'll say that shit. Exactly. You don't think like that. You're like, that's not the first
• 23:47
  thing that pops into your mind when you hear about your friend who's, you know, suicidal and struggling.
• 23:52
  No, you're like, how can we get him some help? Like, let's go spend some time with him so he's not
• 23:55
  alone. That's what we were all saying. And that was where he went. So, you know, it kind of goes
• 24:00
  to show you the, the minds some, some red flags early, early red flags. Yeah. Um, okay. So then,
• 24:08
  I mean, then the obvious, the obvious question is, at what point did you cite it after all these
• 24:12
  red flags that you wanted to work with him? Well, so when I met, when I bumped into him and
• 24:18
  decided to work with him, I hadn't seen him for a few years at what age were you now? I think I
• 24:23
  was 22 when we first met up. And yeah, I was about 22, 22, 23. And yeah, it's 22. Yeah, because
• 24:33
  he was 18. And we bumped into each other at a mutual friend's house and he asked me what I was
• 24:38
  doing these days. And I told him about the SD card business and, and the, you know, the bedsheet
• 24:43
  business. And he's like, oh, you know, you're doing a lot of stuff. You're doing the same thing.
• 24:46
  I'm doing, you know, finding suppliers, arranging logistics, licensing, financing, etc.
• 24:51
  He's like, but I bet I'm making way more money than you. And I thought I was hot shit at the time.
• 24:55
  I was like, I had made about like in about a year, year and a half, about a hundred grand,
• 24:59
  which at the time was very, very young. Yeah, I was young, all legal, you know, that's a caveat,
• 25:05
  exactly. And, and so I thought I was like, I was doing pretty well. I was making way more money
• 25:10
  than any of my friends. And, and I'm like, well, I mean, you have much money. I asked him like,
• 25:16
  how much money have you made? And he goes, he's like, oh, he's like, I'll tell you what I'm going to
• 25:19
  tell you, but only to inspire you, right? Because he wanted me to work with him. And he's like, I'm not
• 25:25
  bragging here. He opens up his computer and he shows me his bank of America. Count yet $1.8 million
• 25:30
  in the bank at 18 years old. And I knew his like parents were not giving him money or anything like
• 25:36
  that. Like I knew his family. So I was like, holy crap. I thought I was doing pretty well by making
• 25:40
  a hundred K. He made almost two million dollars in a year. So I was like, he's definitely doing
• 25:45
  way better than me. And he knows, he knows something I don't. And so he's like, yeah, we should,
• 25:50
  we can make way more money working together. You should talk and we're really at this point.
• 25:52
  What he was doing was all legitimate. Well, completely legitimate. Yeah, everything was legal
• 25:56
  until it wasn't, you know, that's as the famous saying goes. But yeah, so I was like, okay, I'm in,
• 26:02
  you know, when I saw I was super impressed. I couldn't believe that he had done that all of that
• 26:05
  by himself. And so that's how I got into the government contracting business. And then like,
• 26:10
  what was the first to contract that you guys take on? Like, what was the first, like, how do you even,
• 26:14
  so he, he knows the business, he's teaching you the business. What's the first thing that you do
• 26:20
  successfully? He's done a few successfully already. You're new to this. Right. So he's special,
• 26:24
  because he was a gun, he specialized in small arms and ammunition. And this is in 2004, 2005,
• 26:32
  2005, when we actually started working together. And so this was like, right after the United
• 26:37
  States invaded Iraq and Afghanistan. And so the idea there was that we were going to build a
• 26:43
  democratic country. And so without work, I didn't work too well. That's late plans.
• 26:50
  So again, because we destroyed Saddam Hussein, and now we were trying to build up like the country
• 26:54
  of Iraq. So the idea, so we can leave. And part of that was building up their military and police
• 27:00
  force. And they needed lots of equipment for that. So he was bidding on all these contracts to
• 27:04
  supply small arms and ammunition. And that's how he made his $2 million. He did that very well. So
• 27:09
  that was his specialty. And so the idea when I started working with him was that I would do
• 27:14
  something in a different field to expand the business. And so I started working on fuel
• 27:19
  contracts because that's an enormous amount of business. It's very fungible. You know, it doesn't
• 27:25
  gasoline here is same as gasoline there. Right. You know, so it's not, you don't have to worry
• 27:29
  too much about quality. And it's, and there's, it's consumable. So they're constantly needing more
• 27:34
  of it. So my first contract that I ever won in government contracting was for 40,000 gallons
• 27:40
  of propane. And I delivered it to a Air Force base in Wyoming. And how do you do this? Like how do
• 27:48
  you go about finding 40,000 gallons of propane? Because that only many people know it's actually
• 27:53
  simpler than you think. You just Google, you know, propane wholesalers. And in the area,
• 28:00
  because logistic, you have to give them a delivered price. The government always wants a delivered
• 28:05
  price. So the, all costs and all costs and, you know, so transportation included any licensing,
• 28:11
  whatever, you know, all costs you have to figure out and then give them a delivered cost. So I
• 28:17
  just Googled propane wholesalers in the general Midwest area. And, you know, a lot of people ignore you,
• 28:24
  a few people give you prices, some people give you referrals to other people. Eventually I got a
• 28:30
  pretty good price and, uh, and also got a pretty good price on the transportation, you know,
• 28:34
  put it all in all the possibilities in a spreadsheet, figured which combo is the best price. And then
• 28:40
  everyone was an amazing negotiator. You could really talk, you know, so he would got on the phone
• 28:44
  and he negotiated them down to the rock bottom. And I, William, this is the game. The game is
• 28:50
  relationships and negotiate as soon as if you just Google. Absolutely. Your, your margins are going to
• 28:55
  be like razor thin because everybody's googling. And I'm sure after people watch your movie,
• 29:00
  a hundred other thousand people wanted to do the same thing, but it's about how do you get this
• 29:04
  personally even the lowest possible price? Exactly. And so he was, it's all about negotiation and
• 29:09
  relationships. And occasionally you get really lucky and you can buy something like, uh, in a
• 29:14
  liquidation sale and make enormous margins. It's not necessarily always razor thin margins.
• 29:20
  Um, to, to jump ahead a little bit, you know, with, uh, um, uh, you know, with my business war
• 29:26
  dogs academy, uh, one of our students made a 40% margin on, on, uh, something because he bought,
• 29:32
  he bought it wholesale from someone who was doing a fire sale. You know, so you can, there,
• 29:37
  there are, you can make enormous margins. You just need to know the business. You need to know
• 29:41
  the industry. You need to know what's available out there. So, you know, the, the government
• 29:47
  doesn't really care how much margins you're making. They just want the lowest price out of the
• 29:51
  available options. And so usually if you don't know the business, you don't know the industry,
• 29:56
  you're going to bid it at a very low profit margin because you don't know who your competitors are.
• 30:01
  You don't want to lose, right? Because otherwise you get zero. It's better to get a little bit than zero.
• 30:05
  But if you know the industry well and you know what, uh, the other suppliers have access to and
• 30:11
  you know that you have access to, you know, let's say, like there are certain items that they,
• 30:16
  they can be sold underneath manufacturing costs, like clothing, you know, that go out of style,
• 30:22
  you know, the, the next season they're trying to get rid of them. They'll, they'll sell it for
• 30:25
  anything. You know, it doesn't matter. It was a ninth that is zero for that. Exactly. Otherwise,
• 30:29
  it goes in the trash ammunition that militaries, you know, is coming towards the end of their
• 30:33
  official shelf life. Uh, they're happy to get rid of it at very low prices. And when you're in this
• 30:39
  game long enough, you start to see those opportunities. Exactly. You say it. The more we know the industry,
• 30:44
  well, I was going to say, is there like, um, like outside of this is just like smart business and
• 30:48
  the right relationships, right connections and sort of like looking for the opportunities?
• 30:53
  Like, do you need to be licensed to do this to sell to the government? You need to be registered
• 30:57
  with the government, meaning you need to have a company, you have to have, you can't do it individually,
• 31:01
  you have to have do it under a corporate structure. And it could be a US company, it could be a foreign
• 31:06
  company. It doesn't, people think only US citizens or US companies can bid this not true.
• 31:10
  As long as you're not like a company and like Russia or North Korea on or a wrong. Yeah. Yeah.
• 31:16
  Any of our enemy countries, that's going to be a don't incorporate in North, oh yeah. So yeah,
• 31:19
  don't incorporate in North Korea. I don't even know if that's an option. But, uh, but yeah, but as long as
• 31:23
  you're in like a friendly country to the United States, you can register your foreign company to do
• 31:28
  business with the US government. There are certain advantages to four certain US companies. Like,
• 31:34
  you'll they'll have what they call seticides. So, uh, set aside is, uh, the government sets aside
• 31:39
  a certain amount of money to go to special categories of business. So for example, small business
• 31:44
  is a big set aside. I think I forgot the exact numbers, but something about like 20 to 30% of all
• 31:49
  money needs to be spent, needs to be, needs to go to small businesses. These are businesses that do
• 31:55
  like under 10 million of revenue a year. That's how they. And I've got right. So yeah, I only know one
• 31:59
  other person who's played in government contract. Actually, no, sorry, a friend is an investor in
• 32:03
  government contracting and defense and then another friend who actually does it. And she was saying that
• 32:09
  she, she's trying to figure out how to keep her business under a certain dollar values. She's
• 32:13
  not to compete against like Lockheed Martin and Boeing and she could qualify for the small bill
• 32:18
  as set aside. So this is exactly what you're tossing it out. Yeah. And there are other seticides.
• 32:22
  There is, there is, uh, if you're a veteran known business, a disabled veteran known business
• 32:27
  gets special set aside, a woman owned business, a business that's in an economically disadvantaged
• 32:33
  zone, right? So like if you're like in a rural area, they classify certain areas as economically
• 32:38
  disadvantaged. And then you get, there are certain contracts that only these, uh, companies with
• 32:43
  these designations can bid on. So like Lockheed Martin can't bid on a contract that is a set aside
• 32:49
  for small business. So there are certain advantages for these various categories. But other than that,
• 32:55
  you just need to register your company with the federal government to bid on contracts. And
• 32:59
  depending on what items you're shipping to them, what you want to bid on, you may need other
• 33:04
  licenses. Like if you're shipping like machine guns, you may need a class three, uh,
• 33:09
  federal firearms license. Understood. So this, that was your first contract. Yeah.
• 33:13
  Went well. Business is going like it. And when you start to work with that from like what are,
• 33:19
  I mean, obviously there's red flags throughout your entire relationship with them.
• 33:24
  But you've gone into business with him where they're like red flags right away that you noticed
• 33:29
  outside of being a good negotiator, which I mean, yeah, a gift of gab, whatever, like, uh,
• 33:35
  but talk to me about like some of the things you noticed when you were like building this bit,
• 33:37
  like a cool AY with them. Yeah. So there were two major red, well besides the story with the,
• 33:43
  because when I first started working with them, I'm like hung out with them in years. So
• 33:48
  you know, the kid that I knew from years ago, he didn't have those red flags. He was just,
• 33:53
  he was pretty much just a joker, you know, like he was like the class clown, so to speak.
• 33:57
  He was a very funny guy, you know, very, uh, very entertaining. Love to play practical jokes on
• 34:02
  people. That was like his, but he's not doing anything, but he's not doing anything like a sociopathic
• 34:07
  or anything like that. So there were a few red flags that that I noticed somewhat early on that
• 34:13
  kind of gave me pause. Uh, one was this, uh, one was when we went to like a gun show in, in,
• 34:23
  in Orlando. And we were driving on our way back to Miami. And he was driving and we were going
• 34:30
  down this highway, this like really long highway with, and didn't have any, laid at night,
• 34:35
  and it didn't have any street lights. And it was one of those highways where it's very straight,
• 34:39
  but like there's only one lane going one way and one lane going the other way, no real median.
• 34:43
  And so their cars come and buy us. And, and I told him like, Ephraim, you have to turn your
• 34:47
  brights down when there's cars coming at us. He had his high beeps on exactly. And he said,
• 34:53
  he's like, why? I need to see the road. And I'm like, yeah, but you could blind the other driver
• 34:58
  and they can crash. And he's like, who cares? I need to see the road, you know? And I said,
• 35:03
  yeah, but Ephraim, they could crash into us. And he's like, oh, that's a good point. That's a good
• 35:08
  point. And then he turns the high beams down. And I was like, and he did this completely
• 35:12
  seriously. He wasn't joking, you know? Like he was like, oh, like it just dawned on him.
• 35:16
  Oh, I should care about that. That was very self-serving completely one heart. It didn't even
• 35:20
  occur to him that he should care at all about that person crashing into any into, you know,
• 35:25
  and losing their lives, only if it affected him. So that that was like, whoa, this guy is not normal,
• 35:31
  you know? And the other big red flag that I that really struck me like within like about two
• 35:40
  months of working together was he, you know, I we were working out of his living room and he didn't
• 35:46
  have an office. So we were working out of his living room. And I was working on like fuel contracts
• 35:52
  and and but he loved talking on the speaker phone, you know, like he would always do that.
• 35:56
  Side here is conversations. And he got a call from like one of his contacts in the industry
• 36:02
  who was trying to supply the King of Nepal. The King of Nepal at the time had a whole bunch of
• 36:08
  pro-democracy protests in his country. And the King of Nepal was trying to buy attack helicopters,
• 36:15
  riot gear, heavy machine guns, tear gas, et cetera. Was the King of Nepal like dictator?
• 36:21
  Yes. Yeah. He was using King. Yeah. Yeah. Yeah. This sounds like a load of democracy.
• 36:25
  Yeah. A classic King, you know, and he was he was facing down pro-democracy protests.
• 36:30
  And the King was trying to buy all these these pretty serious crowd control methods, you know,
• 36:37
  with the entire range of nonlethal all the way, the very lethal, like attack helicopters and
• 36:41
  heavy machine guns. And Ephraim got super excited. And he's like, I'm going to put together a
• 36:46
  save the King package. And I'm like, Ephraim, that's kind of fucked up. But that's illegal,
• 36:52
  no? So and that's what I told him, like Ephraim, are you sure that that's illegal? Because I'm
• 36:56
  pretty sure the State Department isn't going to be happy about you supplying the King to brutally
• 37:00
  crush the pro-democracy protests. And he goes to me, he's like, just work on your fuel contracts,
• 37:05
  bro, you leave this shit to me, all right? And I'm like, whoa. So there's like zero moral compass
• 37:12
  zero. And also, I was, I mean, besides the moral compass, I was like, this guy might be doing
• 37:16
  some serious illegal shit. And yes, I mean, moral morals the first ESAC put then out of that.
• 37:21
  It's like, yeah. And I'm like, fucked up any legal stuff. And I might get caught up in this.
• 37:27
  And I was like, oh, and so that really kind of scared me. There's only two months in, like two
• 37:32
  months in. How long is it like the whole life of the working together? How long was that? About a
• 37:36
  year and a half. It wasn't very long. No, not that long wasn't very long. And were you a little
• 37:40
  under two years? Because I know like in the in the movie, like the whole last scene is about the
• 37:44
  contract and like, like you, you and air quotes, like don't get paid out. Did you only have contract
• 37:51
  or you want like the cap table? Like were you equity owner in the business? No, I was, we had a
• 37:58
  commission agreement. Okay. So you did not. So technically liability should not be as as
• 38:03
  incumbent on you as on him, because you were not co-founders of the business. I did not own any
• 38:09
  of the business, but I was involved in the activities. You know, I was a co-conspirator.
• 38:15
  I understand because I'm trying, I was trying to figure that out. I'm like, if you didn't do
• 38:19
  anything illegal and my business partner did, but I was a co-founder in the business and technically,
• 38:26
  the business entity was doing illegal shit. And even if I didn't know that he did it,
• 38:31
  there's a chance that I could still be liable. But if I was an employee and my boss was doing
• 38:35
  illegal shit, then hopefully I wouldn't be. But if you collaborated with him in that
• 38:40
  he does illegal activities, then you are liable. And if you don't own the business, I understand.
• 38:45
  Well, no, no, if it's illegal, a ton of percent illegal. I mean, if you didn't know what he was
• 38:48
  doing, he was doing some shady shit on the side or whatever. Okay. So then this is too unsent.
• 38:53
  It's already getting spicy. Okay. So then, you know, the whole, the whole movie is about this,
• 38:58
  like 300 million dollar deal. When does that actually take place? Just to finish up the,
• 39:03
  the, the, the Nepal issue, he worked on it for like two weeks really hard. So he was seriously,
• 39:07
  oh, QA, so yeah, yeah. No, he had sources lined up. He was working on logistics. He had a whole
• 39:12
  fucking, he didn't know shits that it was completely illegal zero. And then he got really pissed
• 39:18
  because as he put it, peace broke out. And he's like, ah, peace broke out. The king made a deal
• 39:24
  with the protesters. The deal is dead. And I was like, that's probably a good thing for him.
• 39:28
  It's a very good thing. Yeah, it'd been in jail. Yeah. A lot earlier. A lot or any are
• 39:32
  negative longer. Yeah. Possibly. It's so, it's so interesting because you hate the term,
• 39:38
  like warlord. Yeah. Or like warmonger or whatever. Yeah. I mean, it's not accurate, I would say.
• 39:43
  No. Yeah. Like what he was trying to do. Yeah. That was more closer to that. Yeah. Super fun.
• 39:49
  Like it's so, it's not funny. It's, it's, it's, it's just interesting because it's almost like
• 39:54
  he was like a walking cliche for arms dealer. Because there's a lot of people that are arms dealers
• 40:01
  that kind of like what you did, you sold to the US government. It's completely above board.
• 40:06
  Whether or not you agree or disagree with what the US does globally, it's a, it's a business.
• 40:12
  You are selling to a, a Western country like Lockheed Martin, Lockheed Martin,
• 40:17
  going, they all do the same shit. It's so strange to me that it seems like he watched Lord
• 40:23
  of War and is like, I want to cause play as an arms dealer. Even though there's more money
• 40:30
  than you know what to do with by selling to the US government, it's just so strange that you
• 40:34
  would want to put your, like start a business to put yourself in an illegal position before you
• 40:38
  even made like any significant amount of money. It doesn't, like, it doesn't compute. But then
• 40:43
  this goes back to your point. He's not thinking like the rest of
• 40:48
  the rest of anybody who would do this business. He did love Lord of War. That was his favorite movie
• 40:54
  because it seems like he watched these. I'm going to be an arms dealer like that and I'm going
• 40:58
  to sell to all these countries all over the world that the US does not approve of me selling to.
• 41:04
  Very interesting. Anyways, so, so this was like the first sort of red flag moment.
• 41:09
  Deal fell apart good because then you would have been in trouble too.
• 41:13
  So what's the next, what's the next, like, major deal? Were there other major deals before
• 41:18
  this $300 million deal? It was, so the first arms contract I worked on when I made the
• 41:24
  switch from fuel to arms was he had won a contract to supply the special forces with a bunch of
• 41:32
  rare gun parts and like weapon systems because the special forces train on a whole bunch.
• 41:38
  They pretty much tried to train on everything. So because they don't, when they're out in the
• 41:42
  field, they don't know what they're going to come across. What kind of equipment is going to
• 41:45
  exactly. So they train on Old World War II, Error stuff, on Soviet stuff, you know, on,
• 41:51
  you know, everything. So he knew the industry well enough that they was this contract goes,
• 41:57
  I think it's like 130 different types of like weapon systems and gun parts and they're all rare
• 42:02
  and like historical and very hard to source. And so he put a very high profit margin on it because
• 42:07
  he knew almost nobody was going to be bidding on this. And he put a very profit, high profit margin
• 42:12
  without actually locking down the sources. And so he won the contract without having the sources
• 42:17
  lined up. So he told me he's like, look, I know we have enough margin on here. We can definitely
• 42:23
  deliver on this profitably, but you need to find the sources to these items. So I don't want to do
• 42:29
  this. This is going to be way more work than I want to do. Why don't you work on this? And so I
• 42:34
  still. So you know, I was like, okay, I mean, he already won the contract. All I have to do is
• 42:38
  deliver at least at least there's that, you know, there's because with government contracting,
• 42:43
  it's like a role of the dice. It's a casino. You don't know, you can put all this work into bidding
• 42:47
  on a contract and then lose. And so I knew at least he won the contract. Now I just have to find
• 42:53
  the sources for the, you know, for the supplies. So that was the first arms contract I worked on.
• 42:59
  It took me like a good two something months to deliver all on that. I had to pretty much contact
• 43:05
  every little gun shop in America. It's like 70,000 of them, you know, and I went down the ATF's
• 43:11
  FFL list. And you know, they actually publish the phone numbers of all the federal firearms
• 43:17
  license holders, the ATF. I downloaded a spreadsheet and it's like 70,000 businesses. And I pretty
• 43:22
  much called up every single one and try to, you know, see what they had. It was an enormous
• 43:27
  amount of work. But I made a decent amount of money. And so that was like the, the first like
• 43:33
  my first foray into the arms business. Were you ever uncomfortable going into arms?
• 43:38
  So I wasn't uncomfortable with that stuff, you know, I wasn't uncomfortable supplying the U.S.
• 43:44
  government. You know, I definitely didn't agree with the U.S. government's
• 43:50
  policies. Yeah, you know, with a lot of polytheists agreeing with policies.
• 43:54
  Yes. And and saying like it's a business. That's true. Yeah. That's true. It was at the time
• 44:02
  the United States was fighting the Taliban. I mean, that was where most of the stuff I worked on
• 44:07
  went. And I didn't feel bad about that. You know, I thought Taliban are they're not great people
• 44:12
  and the people fighting them should be supported and and all that. So I didn't feel bad about that.
• 44:18
  But and also, you know, and this is something that anyone who wants to make excuses says, but like
• 44:26
  an army camp fight without bullets, they also can't fight without fuel or food or, you know,
• 44:31
  jeeps or any million other things. So, you know, it's it's people kind of focus on the arms
• 44:38
  as being like you're enabling, you know, military operations, but really all aspects of the support,
• 44:44
  you know, enabled that. It's just as much. I think they, yeah, you're probably right. You know,
• 44:48
  people think about like dealing in munitions. Right. Okay. Maybe there's like a slightly negative
• 44:55
  undertone to it, but ultimately if you're doing food contracts or medical supplies for the U.S. Army,
• 45:00
  right. It's also important. The same in all the same thing. They wouldn't be able to do what they
• 45:04
  do without all those items. Yeah. So whether it's the bullets or the food, army marches on its
• 45:09
  stomach, as they say. So, I mean, you didn't like, obviously, Ephraim has his own sort of idea
• 45:15
  about what he can do with his business. Were there other points where he tried to do shady shit,
• 45:19
  like deal with other countries like Nepal?
• 45:25
  There, I think there was a moment where he almost got involved in supplying the FARC in Colombia,
• 45:32
  but he didn't end up doing that. That was that was a step too far for him.
• 45:36
  It's a no. Yeah. Yeah. Yeah. He was a step too far. He did try later when he went, when he
• 45:42
  went, was in prison. He tried to revive that deal in order to entrap the guy who was doing it.
• 45:48
  So he could get him. He was elf out. Look, a deal with that. Yeah. That's to.
• 45:53
  Yeah. He was trying to entrap the guy. So it was a guy named Harry Chang who's based in Miami.
• 46:00
  He had done a whole bunch of business with. And Harry Chang tried to get him involved to do
• 46:06
  this business to supply the FARC. And to his credit, he said no. But then when he went to prison,
• 46:13
  he tried to get his dad. There's actually a phone recording on YouTube where he's talking to his
• 46:19
  dad, trying to get his dad to revive the deal with Harry Chang to do this, to supply the FARC,
• 46:26
  so that he could entrap Harry Chang so he can get time off his sentence.
• 46:30
  I have that. Is this normal that dudes in Miami are supplying weapons to like dictators
• 46:36
  around the world? Is this buzz? I hope not. No, but in all seriousness, like this is two instances
• 46:42
  of, so now you have this Harry Chang guy. And then you have Frem as well who was even thinking about
• 46:48
  in Nepal. Is this like a big issue? This is wild. Well, Miami is particularly in the US. Do
• 46:56
  you have a lot of homegrown like weapons dealers that are doing under the table shady shit?
• 47:00
  Well, if it's if it stays under the table, you don't find out about it, right? So I have no idea.
• 47:06
  But but there have been quite a few people arrested for these kinds of deals. Yeah. So they're just
• 47:11
  see money and dollar signs. They see money and they either don't know that it's illegal or they
• 47:16
  don't care. I imagine it's more that they don't care. Like my background like the company that
• 47:23
  the company that acquired my software company, they do hardware. And I use their sales team a lot
• 47:30
  like a lot of a lot of the like when we were acquired, like we were training our sales team on
• 47:35
  product and services and whatnot. And like they weren't allowed to talk to people in certain parts
• 47:40
  of the world. And they were selling cameras. Yeah. And like it was like it's not like it wasn't like
• 47:46
  confusing or it wasn't like it wasn't known. Like everybody knew that we cannot sell to people
• 47:52
  that either represent certain parts of the world or come from certain parts of the world or have
• 47:56
  connections, certain parts of the world. And this was because it was like a large act our regulation.
• 48:00
  Yeah. I mean, it's like very well known and yeah, film equipment. Yeah, not weapons. Right. Yeah,
• 48:06
  I didn't know there were restrictions on film equipment. I know there's a lot of restrictions on
• 48:09
  like night vision goggles and things like bulletproof vests. Which makes sense. So yeah, it makes
• 48:16
  sense. Like I was hearing like if it's like if it's something is a non dangerous as a camera.
• 48:22
  Right. I mean, right, right, right. Yeah, yeah. No, there are there are regular anything they
• 48:26
  call dual use technologies. Right. You know, anything that could be used for military purposes,
• 48:32
  they put restrictions on where you could sell it. And if you do that, you can get in a lot of
• 48:36
  trouble. So yeah, you know, I don't want to say that this is a super common thing, but there's
• 48:44
  but it does happen, you know, that people violate it are and they go to prison for it. And
• 48:48
  that's why it's not enough money in the US government. Like, oh, there's more money than anywhere
• 48:53
  in the US government, right? It seems silly. It seems like you're almost like an idiot for trying
• 48:57
  to to sell to other countries. I would definitely agree. I mean, the United States government has a
• 49:03
  budget, I think, of something like seven trillion, you know, it would not have another money,
• 49:07
  which is more than most other countries combined. Yeah. This is all the California,
• 49:11
  more than most country. Yeah. California on its own is like the fifth biggest economy in the
• 49:15
  world. So it's the United States is so much people don't understand how wealthy the United States is
• 49:20
  and how much money the government spends. It's by far the biggest customer in the entire world
• 49:25
  by many times over. I think that the appeal of dealing with these other countries is that
• 49:33
  when you're doing government contracting and selling to the United States, you're playing the
• 49:36
  casino, right? You are you're you're doing a whole bunch of work. You're submitting the bid
• 49:42
  and then you oftentimes lose, right? In fact, it's more often than not. You lose, you know,
• 49:47
  you win a minority minority of the contract you bid on. That's just normal. And it could be very
• 49:54
  disheartening to people that they put a lot of work into something and then they get no payoff
• 49:58
  for it. So when someone calls them up and says, Hey, I've got this deal to whoever shady character
• 50:03
  oversees, all you have to do is supply. There's no bidding process. Just fucking do it. You know,
• 50:07
  then it's like, Oh, easy money. And and end up in jail. Yeah, except you will. It's small little.
• 50:13
  It's the worst money you can make because that'll that'll that might get your your life destroyed.
• 50:19
  Yeah. So what so what happened with your your your 300 million dollar deal? Where did that come
• 50:25
  from? And how did you find it? And how did you source it? And even the thought process because
• 50:29
  up until this point, you seem like the most above board like you you get the shit isn't
• 50:36
  perfect with Ephraim. But you're keeping him in his lane. Everything you're doing is above board.
• 50:42
  Everything you're doing is clean. And there's like not like a series of of like
• 50:47
  points in your past where you've like tried to do shady businesses. You try and build real
• 50:52
  own businesses that actually that are fully compliant fully above board. So what was the thing
• 50:57
  about this particular deal that sort of swayed you? So well, I mean, that deal was above board
• 51:03
  until it wasn't. Again, but yeah, the 300 million dollar deal that that that was kind of like the
• 51:10
  main focus of the film war dogs was it started. We we site posted on on on the government website,
• 51:19
  which is sam.gov. Now they call it the we saw that about I think was about nine months after I
• 51:27
  started working with Ephraim about eight nine months. And Ephraim saw this this solicitation posted
• 51:34
  on the site. And he he was like, Oh, you know, this is all the stuff that I've already delivered
• 51:41
  in much smaller quantities to Iraq. This was mostly Warsaw packed munitions in for people who don't
• 51:47
  know there's two major style of of weapon systems. There is the West NATO standard. And there's
• 51:55
  the former Soviet Union countries called the Warsaw packed standard. And like the AK-47 is Warsaw
• 52:01
  Pack M16 is NATO. So they were supplying Afghanistan and Iraq with Warsaw packed weapons and munitions
• 52:10
  because that's what the Iraqis and Afghanis were used to. They were already trained on that. And it
• 52:16
  also happened to be as way cheaper than the United States. So these are old audio weapons. These
• 52:20
  are also old Soviet weapons, which the United States doesn't manufacture much of. So when they wanted to
• 52:26
  this was in mid to late 2006 where they put out the contract, they this was like towards the end
• 52:34
  of the Bush administration. And the Bush administration was super unpopular in the United States at the
• 52:39
  time. And they figured that because you so unpopular, the next president would probably be a
• 52:44
  Democrat, which they were right. Obama was the next president. But they also thought that the
• 52:48
  Democrats would pull out of Afghanistan immediately, which they were wrong about, took until Biden to do
• 52:54
  that. But so their plan was that they were going to arm the Afghanis like for the next 30 years
• 53:01
  so that they could hold off the Taliban and any other terror groups that try to set up shop in
• 53:06
  Afghanistan. And so they put out a contract in Iraq. They had they were supplying the Iraqi army
• 53:13
  and they had split their needs amongst a whole bunch of suppliers and it became a big cluster
• 53:17
  fox. So they they wanted to avoid that that logistical nightmare. And they decided to do the their
• 53:24
  entire needs and through one contractor. And that's how this 300 million dollar contract got put
• 53:31
  out. It was every it was munitions. It wasn't weapons. It was everything from like pistol ammo to
• 53:36
  tank rounds anti aircraft rockets grenades pretty much the entire spectrum of munitions that an
• 53:43
  army and police force would ever need for like the next few decades. And they decided to put it out
• 53:50
  all through one supplier. So Ephram had already delivered a lot of these items to Iraq on a much
• 53:57
  smaller scale, which meant that we technically qualified to bid on it. Because the way that works
• 54:03
  is that if you if the contract is above a certain amount these days, it's a if it's above $250,000
• 54:10
  in value, you need to have a certain amount of past performance history, right? You know, proof that
• 54:15
  you've done this business before and the bigger the contract, you're bidding on the more past
• 54:19
  performance they require. And he had lots of past performance because he did a whole bunch of small
• 54:23
  contracts with this type of munitions. So we technically qualified. And so he's like we qualified
• 54:30
  to this. We have to bid on it. Most likely general dynamics or one of the big players is going to win,
• 54:36
  but we have to at least try. And he says to me, he's like, look, I've got, you know, five really good
• 54:42
  sources for this stuff. You know, don't, you know, these are my five sources, these companies don't
• 54:46
  talk to them. But I need you to go and pretty much find every single source that's available
• 54:52
  on the internet in the world. Because you know, that's the only way we even have a shot of
• 54:57
  winning this thing is if we are super competitive and we pretty much look under every rock and,
• 55:02
  you know, make sure that every potential source of supply is is accounted for. And so the other
• 55:08
  contracts for the fuel stuff, we were splitting the profits 50, 50 because I did all the work. And
• 55:14
  then he did everything under his company and financed it and did the final negotiation. So
• 55:18
  so it was a good split. But he says to me, he's like, for this, you know, this kind of my bread
• 55:23
  and butter, you're pretty much filling in the gaps. So we'll do 75 25. And I was like,
• 55:28
  that's fine. This is going to be an enormous contract. I'm going to if we win it. Right.
• 55:33
  But we didn't actually, we didn't really think we were going to win because it was just such an
• 55:37
  enormous contract. But we figured we had to try. So I worked my ass off for like probably about
• 55:45
  two months for during the bidding period. They give you like a deadline of when you need to submit
• 55:50
  your bid. And it was a major pain to get to get quotes for this because it was most of the source
• 55:57
  because of the Warsaw Pact stuff. So most of the sources were from the former Soviet Union who
• 56:03
  don't have the greatest customer service or English language skills. And at the time, they didn't
• 56:08
  even have a lot of them didn't even have emails. They just had fax numbers. So you had to like fax
• 56:13
  everything to them and call them up. Make sure in their phone lines kept them going out. So yeah,
• 56:17
  it would like stop halfway through the fax. You have to like make sure they got all the pages.
• 56:21
  You call them up and they have to find the one guy in the factory who speaks a tiny bit of
• 56:25
  English to confirm they got everything. And they always treat you like you're really bothering
• 56:31
  them by asking by trying to give them business. You know, like it's like the very, the communist
• 56:36
  mentality of like, you're not happy to do your job. You're just trying to skate by with the
• 56:41
  minimum. You know, so it's it was a real pain to work with them. But eventually I got
• 56:48
  I filled in all the cracks, so to speak. And it's actually some of the most profitable aspects
• 56:53
  of that of that contract were from sources I got like the grenades. We made most of the money
• 56:58
  from like the grenades. We just had really good margins on it. And but it took about two months
• 57:05
  and we submitted it to the government. And then we didn't hear from them for like another
• 57:09
  three months. And we were like, okay, we definitely lost this thing. And then they called us up.
• 57:13
  And they're like, we have to do a few audits on your company. And we're like, Holy crap,
• 57:18
  we're still in the running. And it ought to means like what I said, yeah, it means that they're going.
• 57:22
  So before they give you a very big contract is a small contract. They don't do this. But for a very
• 57:26
  big contract, they do like a little investigation into you before they award you the contract.
• 57:32
  And it's a few different aspects. They call it an audit, right? Kind of like the IRS gives you an audit.
• 57:37
  But so they have a financial audit. They want to make sure you have enough money to because
• 57:42
  the government only pays you 30 days after you deliver. And if so if you're delivering a lot of
• 57:47
  stuff, you need a lot of money to finances. They want to make sure you have the money. They want
• 57:51
  to make they actually ask you to list all your sources of supply. So they they we told them who we
• 57:56
  were buying everything from. They want to see what companies you're going to use for transportation.
• 58:01
  Just then everything's above everything. They want it. They want you to pretty much lay out your
• 58:05
  entire plan to deliver on this contract so that they're not wasting their time and that this
• 58:10
  isn't going to end up in a disaster because it's such a big contract. They need to feel comfortable
• 58:15
  that you have a real plan and that you have a real shot at success at this. And they want to make
• 58:20
  sure that you're doing your accounting system correctly. And it's funny because like Ephram had never
• 58:24
  done any of his accounting. He just did everything by the seat of his pants. So he had to hire a forensic
• 58:30
  accountant to come and look at all the deals he'd done and create a financial record. And he
• 58:38
  and to back data to make it look like he had done it at the time to make him look more responsible.
• 58:43
  And we didn't even they wanted to send a contracting officers to our to our office to do a
• 58:50
  facility inspection. And we didn't have an office. So he quickly rented out a place in Miami Beach
• 58:57
  hired a few like a young girls off Craigslist act as like you know a receptionist. So it looked like
• 59:03
  we had people working there. You know, put up a sign. And like within like a space of like a week
• 59:09
  we're like okay, you know, we're ready for like our site inspection. And they it was all like
• 59:15
  is like a group of like four middle aged older ladies. And all ladies for some reason. And they
• 59:22
  walk into the office. And Ephram says to them, he's like, you know, for the inspection. He goes
• 59:26
  he's like, oh, ladies, I couldn't tell over the phone how beautiful you all were. You know,
• 59:30
  if it wasn't completely illegal, I'd buy you all diamonds right now. And they're all like laugh
• 59:35
  and chuckle, you know, and they gave him glowing reviews. And so a couple months later,
• 59:42
  he's an amazing talk. Yeah, he's an amazing talker. You know, I have a lot of shit to say about
• 59:47
  Ephram, but you know, he is a very talented, very talented at the gift of gab. He could talk
• 59:54
  anyone into anything, including me. So yeah, so about two months later, they awarded us the
• 59:59
  contract. I just want to take a second and thank the HubSpot podcast network for supporting
• 1:00:03
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• 1:00:30
  That's insane. It's absolutely insane. So like when you I want to know where it all went wrong,
• 1:00:36
  but also when you look at like the movie, what parts of this were accurate versus not accurate.
• 1:00:43
  So the first thing everyone asks me is was the triangle of death scene real, right?
• 1:00:49
  And it's the funny thing is that it was half real. Well, it was a real story, but it didn't happen
• 1:00:56
  to us. So the triangle of death scene was based on a real contract. We did have a contract to
• 1:01:03
  deliver 10,000 Beretta's to Iraq. Unfortunately, we actually failed to deliver those Beretta's in
• 1:01:10
  real life, but the the the story is based on the the screenwriter of the war dogs film Stephen
• 1:01:18
  Shen. He he wanted to interview these two American contractors who were on the ground in Baghdad
• 1:01:25
  back in like 2004 2005. And so he wanted because he was writing another screenplay about them.
• 1:01:34
  And so he tried to get a flight into Baghdad, but there were no commercial flights. So he flew into
• 1:01:39
  Jordan and he hired a Jordanian driver to drive him to Baghdad. And this driver wanted to save
• 1:01:45
  money on gas. And so he stopped in Fallujah to fill up. And he got shot at by insurgents and
• 1:01:50
  narrowly escaped and got saved by the US Army. That whole thing actually happened to Stephen Shen.
• 1:01:56
  And so when when Stephen was writing the screenplay for war dogs, Todd Phillips, the director,
• 1:02:02
  he's like, yeah, these guys are in the office all day. We need some action here. Why don't you put
• 1:02:05
  your story in you know about you? You know, so that's how that got in there. Just a point that
• 1:02:09
  you mentioned like that one deal with the Beretta's like, why would that not have worked out?
• 1:02:14
  So the so it was actually true that at the time after we won the contract,
• 1:02:21
  the the Italian government passed a law for bidding all arms sales to Iraq. And so we were kind of
• 1:02:29
  stuck because we had sourced the Beretta's in Italy. And now they they weren't allowed to be
• 1:02:36
  exported exactly. So I mean, we tried to get them to accept a substitute or equal they call it,
• 1:02:43
  but they refused. They're like, Beretta's or nothing more like way you can't, you know,
• 1:02:47
  get any sources of Beretta's here. So there's some parts that were accurate. Some parts were not so.
• 1:02:51
  So are there other things like major differences that between the movie and what actually happened?
• 1:02:56
  Well, the the weed deal where he's firing a machine gun into that never having if you fire
• 1:03:01
  machine gun in Miami, you're going to get arrested. We did have machine guns in the trunk of the car
• 1:03:06
  that we were licensed to have them as a a class three federal firearms license. And we would go to
• 1:03:11
  like the gun range with like a pair of Uzi's and everyone else is popping off pistols. And suddenly
• 1:03:17
  you'd hear and suddenly everyone else would stop and they'd like who the fuck was that?
• 1:03:22
  A hundred percent. Yeah. Yeah. So that was fun. Let's see. What other parts? They they add the whole
• 1:03:31
  aspect of my girlfriend, you know, you know, me lying to my girlfriend about the business. And she,
• 1:03:37
  you know, dumps me because I'm I'm lying to her. She knew the whole time. She had no problem with any
• 1:03:43
  of it as she as she put it to me. She's like, as long as you're making money. That's what you
• 1:03:48
  cared about. As long as you've been here. Yeah. Yeah. Yeah. Yeah. She's very supportive. He's very
• 1:03:52
  supportive. She really didn't care about what business I was doing as long as I was bringing in the
• 1:03:55
  money. Yeah. Classic Miami. The very classic way. I mean, okay. So 300 million dollar deal.
• 1:04:02
  Everything sounds like you were doing it right. Yeah. Again, until it doesn't go right. So what
• 1:04:07
  happened? So the the contract was for like 30 different items, right? And as I said, everything
• 1:04:14
  from pistol ammo all the way up to anti aircraft rockets. We had the biggest logistical headache.
• 1:04:22
  We knew was going to be the ammo for the AK 47 7 6 2 by 39. And it was also one of the least
• 1:04:29
  profitable aspects of the contract. It's just high volume low margins. We had sourced this ammo
• 1:04:35
  in Albania through a Swiss arms dealer named Henry Tome in the movies played by Bradley Cooper.
• 1:04:42
  They changed his name to Henry Gerard. But in real life, he doesn't in the movie, Bradley Cooper
• 1:04:48
  looks really rough. You know, he's like thick glasses, unshaven beer, you know, like screaming,
• 1:04:53
  you know, do your fucking job. You know, like that kind of like in real life, he was a very clean cut.
• 1:04:58
  He looked like a Swiss banker. I never heard him raise his voice ever. You know, he was a real
• 1:05:03
  professional. Like he had been in the arms business since like he was eight dollars. It went to.
• 1:05:08
  No, no, no, Henry. So Henry was real slick, you know, he was on the, I think Amnesty International's
• 1:05:16
  like watch list. Okay, that doesn't sound so legit. No, it was not. They never proved anything,
• 1:05:21
  which was why it was legal for us to do business with him, right? And the United States government
• 1:05:26
  knew we were doing business with him because we listed him as one of our suppliers in the audit
• 1:05:30
  that they gave us. So they knew we were doing we were buying through him. Amnesty International put
• 1:05:36
  him on a watch list because they suspected him of supplying some warlords in Africa with various
• 1:05:42
  things, but they could improve it. So was he never got officially legally banned. But he'd been
• 1:05:49
  doing business in the arm. He'd been in the arms business since he was like 18 years old. He
• 1:05:53
  was like in his 40s by the time we were doing business with him. So he was very, very connected.
• 1:05:57
  He set up a deal, a deal for us to buy the AK 47 ammo from the Albanian government who at the
• 1:06:05
  time was trying to join NATO. And one of NATO's requirements is that they get rid of all their old
• 1:06:11
  Soviet weapons and ammo. And so they were going to have to pay to dismantle this stuff. And so
• 1:06:17
  they were thrilled to sell it for pretty much anything. And Henry was really good friends with the
• 1:06:22
  Albanian Prime Minister's son. And that's how he like set up this deal for us. So at the time,
• 1:06:30
  we didn't know anything about Albania. Who knows about Albania, right? It was a tiny little
• 1:06:36
  country. Most people haven't even heard of it in the United States. So we signed the contract
• 1:06:42
  to buy this stuff. And we at the time there was an enormous spike in oil prices in early 2007.
• 1:06:52
  And we had to fly everything into Afghanistan by air freight because Afghanistan is landlocked
• 1:06:58
  and it's Pakistan on one side and Russia and the Central Asian countries on the other side. And
• 1:07:03
  so and surrounded by warlords who would just love for a big shipment of ammunition to go through
• 1:07:08
  their territory that they can grab. So we had to fly everything in an 80, 90% of the air freight
• 1:07:15
  is fuel costs. So when the fuel when the oil prices spiked, we were like underwater on this
• 1:07:22
  aspect of the contract. We were going to lose money here. Now a professional company like general
• 1:07:26
  dynamics, they would have hedged, right? They would have bought like a fuel hedge, but Ephraim
• 1:07:30
  doesn't run like that. You know, he doesn't need that. So we were kind of screwed. We were like,
• 1:07:35
  how are we going to do that? But it was only on one part of the con. It was only on one part.
• 1:07:38
  The rest of it was very like the grenades and the larger caliber stuff was very profitable.
• 1:07:42
  But we didn't want to lose money on this. So you know, we were actually debating, you know,
• 1:07:47
  maybe it's better to lose money on this aspect of the contract so we could deliver on the other
• 1:07:51
  aspects and overall we'll make money. But of course, that was like Ephraim was allergic to that. He's
• 1:07:56
  like, no, we're not losing money. You know, and so I had the idea. I told Ephraim, like, you
• 1:07:59
  know, we, because we got pictures of the, you know, of the ammo and we're like, this is,
• 1:08:06
  they were stored in these in these metal sardine cans, which were vacuum sealed. And the metal
• 1:08:11
  sardine cans were put into these heavy wooden crates. And I told him like, Ephraim, we don't really
• 1:08:15
  need to ship the wooden crates. We could just take the sardine cans out and scrap them to the
• 1:08:19
  pallet and we'll save some weight. Maybe that'll be enough weight to make this profitable. And he's
• 1:08:24
  like, oh, that's a great idea. So I told him, okay, I'll ask the Albanians to weigh the crates.
• 1:08:29
  He's like, oh, you can't trust those motherfuckers. We have to go to Albania ourselves and weigh it.
• 1:08:33
  And he's like, but not you. I need you in Miami. You're dealing with the guy. I was dealing like
• 1:08:38
  nine different suppliers. I was also dealing with the with the government who based at a Rock Island
• 1:08:43
  arsenal in Illinois. So all these different time zones, he's like, I need you in the office
• 1:08:47
  taking care of the contract. He's like, we need to send someone. So I had a really good friend of mine,
• 1:08:52
  Alex, at the time he had just done a stint. He's a dual citizen with France. So he had done a
• 1:08:57
  stint in the French military. He had a degree in international relations. He's trilingual,
• 1:09:03
  very smart guy. He was looking for a job. And I said, well, why don't we send, you know, Alex
• 1:09:07
  can take care of this. And so we send Alex over there. And he calls me up and he's like, he's like,
• 1:09:14
  yeah, I weighed the crates. These are the numbers. And it turned out the wooden crates were super
• 1:09:18
  heavy. And so it put us back into profitability. And he's like, but you do know this stuff is
• 1:09:24
  all Chinese, right? And I'm like, what are you talking about? He's like, yeah, there's like Chinese
• 1:09:28
  markings all over the boxes. And I'm like, let me tell Ephraim. And he Ephraim's like, oh,
• 1:09:34
  shit, that's, that's a big problem because our contract specifically said no Chinese ammunition
• 1:09:38
  could be delivered under this contract. And why? Because there is a arms embargo against,
• 1:09:44
  in 1989, there was the Tiananmen Square Massager. And in Central of Beijing, a bunch of Chinese
• 1:09:51
  college students were protesting for democracy and the Chinese government rolled in tanks and
• 1:09:56
  soldiers and killed a lot of people. There's a very famous picture of a guy standing in front
• 1:10:02
  of a line of tanks. So that was on international TV. And because of that, the United States placed
• 1:10:10
  the Chinese government on an arms embargo. So it's illegal for US citizens companies to do
• 1:10:16
  military business with the Chinese. So our contract said no Chinese ammunition could be delivered
• 1:10:23
  delivered. It's not from China directly or indirectly, they spoke directly or indirectly.
• 1:10:29
  Now, the reason they put that in was as a reference to the embargo, but they didn't reference
• 1:10:34
  the embargo in our contract. So the ammunition that was in Albania had been given to the Albanians
• 1:10:41
  by the Chinese in the 70s. Because Albania pulled out of alignment with the Soviet Union,
• 1:10:47
  made an alliance with China. It was run by this crazy dictator who was a true communist believer.
• 1:10:53
  And he thought that the people in the Kremlin were a bunch of self-serving assholes and not true
• 1:10:58
  communists, but the Chinese were. He liked Chairman Mao. So he made an alliance with the
• 1:11:02
  chairman of the now extreme communists. And so when he pulled out of the alliance with the Soviet
• 1:11:08
  Union, he thought the Soviet Union would invade him as they did with like Czechoslovakia and other
• 1:11:13
  places. They don't like it when you pull out. And he thought because he's communist, NATO would
• 1:11:18
  invade him too. So like the two big superpowers of the world were going to invade his tiny little
• 1:11:23
  country. And so he decided that his strategy was to create a massive network of underground bunkers
• 1:11:32
  all over the all over the country to be safe from bombardment and pack them full of weapons
• 1:11:38
  and ammunition so that if he gets invaded, all his citizens could become soldiers and everyone
• 1:11:43
  fights to the death. That was his plan. He called it total war. And so he got his weapons
• 1:11:49
  in ammo from his new best friends, the Chinese. In the 70s, before there was an arms embargo
• 1:11:56
  against the Chinese. So this ammunition did not violate the arms embargo, but it did violate
• 1:12:00
  the terms of our commercial contract with the US Army because it's just said no Chinese
• 1:12:06
  directly or indirectly period, not no Chinese that violates the arms embargo. So at the time when
• 1:12:12
  we discovered that this was Chinese, we had a discussion. We're like, okay, we have two options
• 1:12:21
  here. We could tell the army and they can and ask for a waiver. We're like, hey, you wrote our
• 1:12:27
  contract a little vaguely. Can you just specify that it's just Chinese that violates the arms embargo
• 1:12:34
  post. Yeah. Post embargo. Yeah. Post embargo ammunition that we can deliver.
• 1:12:39
  You know, and we thought, well, if we do that, they could say yes. And in retrospect, they
• 1:12:44
  probably would have. Because it turned out they knew the whole time what we were delivering.
• 1:12:48
  The State Department in Albania obviously knew because they know the history of Albania.
• 1:12:53
  And you know, but we also thought if we tell them this, then the army could say something
• 1:13:01
  along the lines of, well, you know, in general dynamics and your other competitors,
• 1:13:06
  they were very upset. You won this contract and they really were. We had met with the leader of
• 1:13:12
  the brokering group in general dynamics who was working on this and he told us, oh, yeah,
• 1:13:17
  we're very confident we're going to win this. So you don't have to worry about that. You know,
• 1:13:20
  you don't, don't, don't, don't put too much work into this. And so we knew that they were really
• 1:13:24
  pissed. That's a lot of money even for them. Yeah. Even for them, $300 million. Well, I think
• 1:13:29
  they bid it at like $500 million. So we beat them by quite a lot. Yeah. Yeah. That's a half a
• 1:13:34
  billion dollar contract that moves the needle even for general dynamics. So so we were worried
• 1:13:40
  that the army would say something along the lines of, well, you know, you know, all your competitors
• 1:13:44
  had to bid under the terms of the contract with no Chinese period. It's not fair that we changed
• 1:13:49
  the rules after. So we're going to take this contract away from you, put it out for open bid
• 1:13:54
  and you could bid on it correctly this time. And good luck. Do you believe truly though? Because when
• 1:13:59
  I look at that situation like outside looking at it and you know what the army would and wouldn't do,
• 1:14:04
  when I think about that, I would just think they would say, no, please go source the ammunition
• 1:14:08
  somewhere else. We don't want to just read. Who wants to put an R of Neo to study? They don't want
• 1:14:12
  to do it. The problem was and in retrospect, they definitely would have said that first, right?
• 1:14:17
  The problem is is that there is a, it takes a while to move arms, right? You need to get the licensing
• 1:14:24
  and the overflight permits and all that. Every time you, if you fly military gear over a country's
• 1:14:30
  airspace, you need to ask permission from that country and they need to give you a license to fly
• 1:14:35
  or military stuff over. And I think there was like 12 or 13 countries between Albania and Afghanistan.
• 1:14:41
  And so it took us like a good like two, three months to get all that lined up. And by the, and so if we
• 1:14:48
  were going to switch sources, it was going to take us another bunch of months to do that. And at the time,
• 1:14:54
  there was a, there was a, so Afghanistan has a fighting season because they have really
• 1:15:01
  tall mountains. And in the winter, it fills up with snows and you can't, it becomes impassable.
• 1:15:06
  So this was like April time. So fighting season started because the snows were melting and the
• 1:15:11
  Taliban was attacking and our Afghan allies were running out of ammo and the army was yelling at us,
• 1:15:16
  get that shit over there. So they were very, they were very high sensitive. And we knew if we
• 1:15:22
  were going to switch sources, that was going to delay things at least another two, three months.
• 1:15:26
  Now, in retrospect, them rebitting out the contract would have delayed it even more. So, but we
• 1:15:31
  didn't make that calculation. You know, so in in in retrospect, they knew the whole time anyway because
• 1:15:39
  our Alex actually would met with one of the representatives from the State Department in Albania.
• 1:15:45
  And he mentioned, he's like, Oh, yeah, that stuff's all Chinese, but it's great. The Albania is
• 1:15:48
  trying to get rid of it anyway. And our Afghan allies need it. It's just a win, win, win for everybody.
• 1:15:53
  Exactly. So the the State Department had no problem with it. We were just worried that it would
• 1:16:00
  that some bureaucrat in the army, you know, is going to be like, Oh, well, this violates, you know,
• 1:16:06
  the terms of our bidding process, et cetera, et cetera. And you bid this under false pretenses and
• 1:16:11
  accept, you know, like, and you got us to put all these licenses for stuff that doesn't,
• 1:16:16
  it's so, but that's wild that even though they were most likely okay with it, you still got in
• 1:16:22
  trouble for something that they were most likely okay with just because you didn't ask. Yeah,
• 1:16:26
  which is absolutely why like you think that that would come into play when they were actually
• 1:16:30
  looking at what did these guys do wrong? Right. And it's like, well, yes, maybe it's like a fine,
• 1:16:39
  or, or, or you can't bid for a period of time. But if you were okay with it to begin with,
• 1:16:46
  why are you sending guys to jail over what is really a technicality and contractual language?
• 1:16:54
  That's what's very interesting. Well, they weren't going to. And they actually knew, they,
• 1:17:01
  okay, so where this, I'll go through, I'll go through as a little mystery jumping around.
• 1:17:06
  Yeah, yeah, excited about this. Yeah, yeah, it is. So the way the whole thing went down,
• 1:17:11
  so we decided to repackage the ammo. And, and to hide the fact that it was Chinese, just to,
• 1:17:17
  so we wouldn't take the risk of triggering some bureaucrat to cancel our contract.
• 1:17:23
  We hired some Albanian guy to do the repackaging. He was going to charge us like a hundred grand
• 1:17:30
  to repackage 150 million rounds. And we were saving like three million in air freight costs,
• 1:17:34
  so it was a great deal. But of course, Ephraim wanted to make more money. So once it started
• 1:17:42
  delivering on a regular basis, he decided to try to, he tried to cut Henry out of the deal,
• 1:17:49
  to negotiate directly with the Albanians. The Albanians told him, no, we're not cutting Henry out
• 1:17:54
  of the deal, probably because he was paying off the politicians who said this whole thing up.
• 1:17:58
  Not that we knew about it, but that's probably what was happening. And, um, but the Albanians,
• 1:18:04
  uh, they told, they told them it's like, but if you give us the contract to do the repackaging,
• 1:18:10
  then we'll give you a discount on the ammo because we were using some third party Albanian.
• 1:18:14
  And so Ephraim was like, yeah, great. That guy's fired. You're hired. Let's do this.
• 1:18:17
  You've got a small discount on the ammo. The guy who he fired got stuck with $20,000 worth of
• 1:18:22
  boxes that Ephraim refused to pay him for $20,000, $20,000. And you've just refused to pay him.
• 1:18:29
  He's like, yeah, fuck that guy. What's he going to do? He's not going to do anything, you know?
• 1:18:32
  And I told him, like, I probably should probably pay him. He knows everything. He's like, don't worry
• 1:18:36
  about him, you know? And so that guy got really pissed, as you could imagine, and he told the New
• 1:18:42
  York Times what we were doing. So this, this guy had the, the foresight thing, I'm going to
• 1:18:46
  fuck these guys over by going to the New York Times. Yeah. And he actually recorded
• 1:18:50
  from secretly while talking to him on the phone and got him to admit that he thought that the guy
• 1:18:56
  he was dealing with was part of the Albanian mob, which has actually turned out to be true.
• 1:19:00
  It's like the guy who was the, like, I don't know how his involvement got there, but the guy who
• 1:19:06
  was connected to the, to the Prime Minister's son turned out, a guy named Mikhail Deliorgi, he turned
• 1:19:12
  out to be, like, the leader of the Albanian mafia. And so the, the, the, the box guy, Costa Trebyska,
• 1:19:21
  he called up Ephraim, and he's like, you told me that this guy, Deliorgi is part of the,
• 1:19:25
  the Albanian mob, right? I mean, he was like in trapping, and, and the role is like, yeah, I think
• 1:19:30
  he is, but yeah, I don't want to know, you know? Not my business. Oh, my God. Yeah, this
• 1:19:35
  conversation is on YouTube. That's so funny. Um, not really for you. Yeah, yeah, I didn't know.
• 1:19:40
  I mean, now it's funny. Yeah. So yes, anyway, so Costa got pissed. He told the New York Times,
• 1:19:45
  and even bigger miss, he, the thing where he really went wrong is he told the local Albanian press
• 1:19:51
  that the Albanian politicians were doing kickbacks. And a week after that article was published,
• 1:19:57
  he winds up dead in a really mysterious, he, like, he was, they found him in a field. Yeah.
• 1:20:03
  In the dirt field on a dirt road, and his car had somehow run him over.
• 1:20:09
  Very suspicious, very suspicious. It got, but the government ruled it an accident. Oh,
• 1:20:14
  dear. But nobody thinks it was an accident. Most people, I was going to run them over. Yeah,
• 1:20:19
  it's it. Yeah, I'm not really sure how that, I guess they claimed he was trying to fix his tire,
• 1:20:23
  and then it went into neutral. I don't know what the mental gymnastics. Oh, yeah, yeah, yeah.
• 1:20:28
  Yeah, over 20 grand over 20 grand. Yeah. So then, you know, so the feds, so after, after that
• 1:20:35
  whole, that whole thing happened, the contract was being delivered on a regular basis. We had like
• 1:20:41
  four aircraft loads flying into Afghanistan every week, and then from comes into my office,
• 1:20:47
  and he says to me, he's like, you know, a lot of the guys on the office are saying that,
• 1:20:51
  because at this point, we had about 15 employees, you know, we had like a little boiler room going,
• 1:20:55
  and he's like, a lot of the guys around the office are saying, you're not pulling your weight
• 1:20:59
  around here anymore. I'm like, what are you talking about? The thing contracts going well. And he
• 1:21:03
  says, well, you know, yeah, yeah, our Afghan contracts going well. But we're really struggling
• 1:21:08
  on these Iraq contracts, and you're not helping with that. And I said, well, I'm not getting
• 1:21:11
  a commission on that. I only get to commit, I'm not your employee. And he's like, yeah, but if,
• 1:21:15
  if you don't, if our Iraq contracts go down, the whole company could go down. And that takes
• 1:21:21
  your Afghan contract with it. So you need a, you need to like help out with everything. And I
• 1:21:24
  said, well, you want to give me a piece of the company. And he says, you know what? David,
• 1:21:29
  I've been thinking about this a lot. You're a big reason why AUI is doing so well. AUI was the
• 1:21:36
  company, you know, is the why we're doing so well. And I own 100% of this company and never thought
• 1:21:41
  I would give anyone a piece of it. But I'll tell you what, I'm going to offer you $100,000 a year,
• 1:21:49
  executive salary plus one percent of AUI. And I said to him, well, you know, the Afghan contract
• 1:21:56
  is going to make us like 90% of the money going in the next few years. And I'm supposed to get 25
• 1:22:01
  percent of that. So I think I'll stick with that, you know, and I'm going to make, you know,
• 1:22:05
  I don't know about like $15, $20 million of it. So you're 100 grand a year salary. I'm good.
• 1:22:10
  I think I'll stick with you. And he goes to me, he's like, well, how about zero? Because that's
• 1:22:14
  the only offer on the table. And I said to him, well, in that case, go fuck yourself. And I'll see
• 1:22:20
  you in court. And so I walked out. And about a month, we started to do it at the time. Yeah.
• 1:22:27
  This is when the article's being published. No, not yet. Oh, not yet. That is later.
• 1:22:32
  Okay. Yeah. So I'll give you the chronological order. So I quit AUI. I decided to, you know,
• 1:22:38
  we negotiate. I was getting ready to sue him. My lawyer told me, well, he, you know, he's,
• 1:22:43
  this is going to take years to go through the lawsuit, better to just negotiate something so you
• 1:22:47
  can move on with your life. We negotiated like other things like 300 K. And he owed me about four
• 1:22:54
  million dollars at the time of what we had delivered. And I was like, you know, what I want to get
• 1:22:59
  him out of my life. I want to move on. You were that willing. I would, you know, eat what I was
• 1:23:03
  about to go bankrupt because I had been, I had been living off because I hadn't pulled a penny out
• 1:23:09
  of this the entire time because every time I'd win a contract, he, we were about to win another one
• 1:23:14
  by the time we got paid. And he's like, Hey, I'm using my money to finance this contract. You
• 1:23:18
  just made a bunch of money from this contract. So why don't you roll your money into the next one
• 1:23:22
  to finance the next contract? I'm like, Oh, I guess that's fair because he, but what was the deal
• 1:23:27
  with the financing? Like you should take your 25% out. So he was using all his money to finance
• 1:23:32
  the business owner. That's too bad, right? Yeah. So that was, that was how he portrayed it to me.
• 1:23:38
  Is that I'm using my money to finance it? You just made a bunch of money. It's only fair. You
• 1:23:43
  should use your money to finance it. It was still a tiny fraction of the money he was using. So
• 1:23:48
  he's like, I'm still financing most of it. But you know, you got to have your skin in the game too.
• 1:23:52
  So I wasn't pulling any money out of this. And I was slowly using my 100 grand that I had in
• 1:23:58
  savings at the beginning of this. And I was down to like 20 grand. And, um, and so I realized,
• 1:24:04
  man, if I don't make money soon, I'm going to not be able to make rent. Uh, and so, and I had a kid
• 1:24:10
  that was, it was about six months old. So I had to start supporting my, my daughter. And, uh,
• 1:24:17
  and I realized, you know, like after I was like super depressed after he, you know, I,
• 1:24:21
  because I went from, I thought I was going to be a multimillionaire to, I'm about to go bankrupt.
• 1:24:26
  And I realized, well, I know this business. I don't need him to do it. I can start
• 1:24:30
  bidding on contracts myself. But I needed money because I was, you know, that takes quite a few
• 1:24:36
  months to win your first contract, usually. Um, and there's no guarantee. And I had a kid to support.
• 1:24:42
  And I, you know, it was, it was, it was, it was, it was, it was, it was, yeah. Yeah. Yeah. And
• 1:24:46
  exactly. So I was like, you know what? I could either chase him for years to try to get the millions
• 1:24:51
  of dollars he owes me. And even if I win, I knew that he had, uh, uh, offshore accounts in the
• 1:24:57
  social islands and other places, he's probably gonna hide his money. Everything he does is just like
• 1:25:02
  really shitty. Yeah. Yeah. Yeah. So like I had zero doubt that he would try that even if I won the
• 1:25:09
  court case, he would pull some shenanigans to avoid paying to hide the money. And I thought, well,
• 1:25:15
  if we come to an agreement, yes, it's a tiny fraction of what he owes me. But at least it's guaranteed
• 1:25:19
  and I'll have enough leeway to support myself and my kid until I get my, you know, my feed off,
• 1:25:24
  you know, the underground business running. Exactly. So that's, so that's why I agreed to it. It was
• 1:25:29
  not because I thought it was fair. You know, it's that super dirty. Yeah. That's so shitty. It's just
• 1:25:34
  this horrible. Yeah. So the, the day we were supposed to sign the contract to, uh, for our,
• 1:25:40
  uh, agreement in our settlement of the Fed's rate is office. And then my lawyer tells me you
• 1:25:49
  can't take any money from him because then it looks like you're paying, he's paying you off. So
• 1:25:52
  the Fed's rate is office. They, um, they find on his desk, um, a handwritten note to do list.
• 1:26:02
  And one of the items on his handwritten to do list is repackage Chinese ammo. He didn't have,
• 1:26:07
  he could have said repackage ammo. He wrote repackage Chinese ammo, repackage Chinese ammo in his
• 1:26:12
  handwriting on his desk. And, and so I thought, okay, well, this is gonna, this is all going down
• 1:26:18
  from here on out. Um, but then they didn't do anything, right? For like six months, they kept on
• 1:26:24
  take the army kept on taking delivery of the Chinese ammo after this. Uh, and, and I was like, okay,
• 1:26:31
  maybe they're not gonna, you know, go after and do the Fed's communicate with you. Yeah. So they,
• 1:26:35
  so they, um, they contacted me and my lawyer, the first thing my lawyer told me, he's like, okay,
• 1:26:41
  the first thing you have to do is go through your emails and see if there's anything
• 1:26:47
  incriminating in there. And so I searched Chinese ammo, repackage, and there were a whole bunch
• 1:26:52
  of emails. And it was all very incriminating. At first, we, he had said when we first started
• 1:26:57
  this whole thing, he was like, oh, we're always talking on the phone. Nobody's writing emails.
• 1:27:01
  But then he, he, um, he had insisted Alex, uh, send him pictures of the, of the cards, because
• 1:27:08
  he didn't trust Alex's assessment that this was Chinese characters. He wanted to see himself.
• 1:27:12
  So there is an email out of pictures of the Chinese boxes that he sent to, uh, for him and to me.
• 1:27:18
  And then one of our investors, Ralph, um, he, um, he had sent us an email, uh, with step-by-step
• 1:27:26
  instructions, how to sand Chinese markings off wooden crates. And there was like pictures,
• 1:27:31
  and it was very incriminating. Uh, so we knew, uh, the second I saw those emails, I'm like,
• 1:27:37
  there's no way I'm going to win this in court. And so my lawyer told me, he's like, well, um,
• 1:27:42
  how much justice can you afford? And I'm like, how much does this get out of you? Do you have an
• 1:27:46
  adversarial system? Yeah, exactly. And, uh, and he's like, yeah, because like, even it, he's like,
• 1:27:51
  look, maybe we can get you on a tech off on a technicality, but it's going to cost you at least,
• 1:27:55
  like 300 K. Do you have that? I'm like, no, I don't have that. You know, I'm about to go
• 1:27:58
  fucking bankrupt because this guy can't pay me. And, uh, he's like, well, in that case,
• 1:28:02
  he probably plead guilty because you don't even, you can't even put up a good fight. And anyway,
• 1:28:07
  there's a lot of evidence against you. So, uh, but at this point, you don't even like the feds
• 1:28:11
  raid, but you don't know that the feds are actually going to charge you with anything yet. No,
• 1:28:15
  so, but they wanted to talk to me. And then the question was, do you stonewall them or do you,
• 1:28:19
  or do you talk to them? And you start to, and so are to play ball. Yeah. So my lawyer told me,
• 1:28:24
  is like, your only option here is to talk to them because you don't have enough money to
• 1:28:28
  defend yourself. And there's a lot of incriminating evidence against you. So is my professional
• 1:28:33
  opinion, you should talk to the, to, to the agents, be completely honest with them, tell them
• 1:28:37
  everything you know. And hopefully they won't go too hard on you. And so I did that. Alex also did
• 1:28:43
  that. Um, and, but then they told us they're originally the feds were like, oh, we're not going
• 1:28:49
  after you guys because you didn't even make any money from this. Really have from as the target.
• 1:28:55
  And, but then, you know, they interviewed us. We told them what we knew. And then we didn't hear
• 1:29:00
  from them for like six months until February of 2008 or March 2008. Uh, the New York Times finally
• 1:29:07
  publishes their front page article about us. And it wasn't flattering. My mug shot and Ephraim's
• 1:29:13
  mug shot were on the front page of the New York Times next to a picture of Rusty looking ammunition,
• 1:29:18
  which wasn't even the Chinese ammo. It was actually Bulgarian ammo that Ephraim had bought
• 1:29:22
  site unseen for a very low amount. He didn't, it was like such, it was like only 30,000 rounds.
• 1:29:28
  Different deal. You know, completely different deal. So he, the way that, so the way that picture got
• 1:29:32
  on the front page of the New York Times was, um, we had a, um, we had the grenades were coming at
• 1:29:38
  a Bulgaria. And we had some extra room on the aircraft. And he had gotten off for like 30,000
• 1:29:44
  rounds of AK 47 ammo, um, for very, very cheap, even cheaper than the, than the, like a quarter of
• 1:29:50
  the price of the Albanian, uh, ammo, which was already super low. And, but it was such a small
• 1:29:56
  quantity of ammo. It wasn't worth flying over there to inspect it. And he's, and he figured, you
• 1:30:00
  know, if it's good, we'll make an enormous margin. If it's bad, I'm not paying that much for it.
• 1:30:06
  So why not? He rolled the dice turned out. Obviously was crap. And it got to Afghanistan, the
• 1:30:11
  receiving officer took one look at, and he's like, I'm not paying for this garbage. And, but of
• 1:30:16
  course, there's no, they didn't want to pay to ship it back. And there's no ammunition,
• 1:30:20
  recycling facilities in Afghanistan. So they just shoved it to the side of the airport and left it
• 1:30:24
  there. And it just kept on corroding in the open air and the rain. And so by the time the New York
• 1:30:29
  Times sent a reporter over there too, and that's getting you and all the stuff that you've done.
• 1:30:34
  And they asked someone, can you show us some stuff that AUI delivered? They pointed to that. And
• 1:30:39
  that's the picture that ended up on the New York. And it's like really corroded nasty looking
• 1:30:43
  stuff. And the way they wrote the article that implied that all the stuff we delivered was
• 1:30:47
  of similar quality, which was not true. In fact, the Army stated in court later on that they
• 1:30:53
  were completely happy with the quality of the ammunition. So, but like still, that doesn't
• 1:30:58
  tie together why the feds decided to charge you because the article comes out. It's just because,
• 1:31:04
  is it just because it's embarrassing? Yes. You feel like you genuinely believe that that article
• 1:31:10
  didn't kind didn't come out. Absolutely. And so what happened with the article comes out.
• 1:31:16
  It creates a massive political firestorm. There were hearings in Congress. There's a YouTube
• 1:31:22
  videos out there of some like Senator with one of those big easels on the floor of Congress and
• 1:31:26
  with a picture of me and F from on there. He's like, and this is a 21 year old, you know, the
• 1:31:32
  company is owned by a 21 year old whose vice president is a licensed massage therapist. I was
• 1:31:36
  working as a massage therapist back then. And, you know, and this, these are the gentlemen who
• 1:31:42
  the Bush administration is entrusting to supply a critical, you know, component of the war on terror.
• 1:31:48
  You know, so it became a big political scandal and like a way to embarrass the Bush administration
• 1:31:53
  and the Army like a two days later put out a statement. We had no idea any of this was happening.
• 1:31:58
  We're taking canceling the contract and it came out later in court because Ralph took it to court.
• 1:32:04
  Ephraim and I and Alex all played guilty. But Ralph took it to court. So there was a lot of discovery
• 1:32:10
  that came out during that process. And so the email there was after the feds rated the office in
• 1:32:15
  August of 2007. They had sent the Justice Department sent an email to the US RV telling them
• 1:32:24
  this stuff is Chinese. You may want to stop taking delivery on it. The Army sent them back an email
• 1:32:30
  saying this ammunition is critical to the mission in Afghanistan. And if you want us to stop
• 1:32:35
  taking delivery on it, we're going to need a letter from the attorney general of the United States
• 1:32:40
  instructing us to stop taking delivery. And that letter never came. So they kept on taking delivery
• 1:32:45
  for another six months kept on paying Ephraim with every shipment. And even after they were
• 1:32:51
  directly informed in writing that it was Chinese ammunition, they didn't care. And because
• 1:32:56
  as far as they were concerned, it met all the qualifications of what they needed. And it's the
• 1:33:02
  Justice Department's job to enforce the laws. And they were not telling them to stop at least not
• 1:33:08
  officially. So they said, you may want to stop. They kind of give it as a suggestion. And they're like,
• 1:33:13
  well, we're not going to take your suggestion because this is important. We need it. But if you
• 1:33:18
  want to order us to stop, it's going to need to come from the attorney general. And the attorney
• 1:33:22
  general never decided to send that letter. So why do you think still they proceeded with
• 1:33:27
  with charging you even even though they knew that this was happening behind closed doors. And
• 1:33:31
  even though the ammo was because they wanted to cover their own asses. That's the once the
• 1:33:37
  New York Times created this political scandal. Yeah. They had to look like they were doing something
• 1:33:43
  about it. Right. So that's why the Army canceled the contract. And then about a week later,
• 1:33:48
  the Justice Department came back to my lawyer and they said, hey, you know, I know we said that
• 1:33:53
  we wouldn't charge you with any of this. But we're sorry. You're too close to the to the and also
• 1:33:58
  Alex. He was on the ground in Albany. You guys are just too close to the and and too essential to
• 1:34:05
  the whole operation for us to charge Ephraim and not charge you. And so the way they charged us
• 1:34:11
  was they said, you guys delivered 71 aircraft loads of this Chinese ammunition to Albania.
• 1:34:17
  And in each aircraft, you supplied with the with the ammunition a document called the
• 1:34:22
  certificate of conformance. And the certificate of conformance listed the type of ammunition that
• 1:34:27
  was on board the quantity, the year of manufacture, and most importantly, the place of origin. And the
• 1:34:32
  place of origin line, you put Albania and you knew it was really China. And not only did you know
• 1:34:38
  it was China, you had a whole operation to disguise that it was China. So this submission of this
• 1:34:43
  document is an act of fraud. And you did the 71 times 71 counts of fraud and each one could get
• 1:34:51
  you five years in prison. So you're looking at 355 years in prison. If you fight us, but if you
• 1:34:57
  plead guilty, we'll combine all those 71 counts into one as prosecutors. They've got the power to
• 1:35:03
  do that. And so the max you're looking at if you plead guilty is five years in prison. But because
• 1:35:10
  you plead guilty, we're going to tell the judge that, you know, you you you cooperated and that
• 1:35:15
  you regret your actions. You'll be a good citizen from now on. And so we'll recommend to the judge
• 1:35:21
  that they that the judge give you the low end of the guideline. So maybe you'll get one, maybe
• 1:35:25
  just probation, you know, up to the judge, not our call. That's very scary. They're dealing with it.
• 1:35:30
  Exactly. So that's the choice they give you. You want to spend the rest of your life in prison
• 1:35:34
  or maybe nothing. But you have to know when they're going through this whole process, like it's not
• 1:35:38
  like they haven't arrested you or anything like that at this point. Like it's a very like
• 1:35:44
  almost like a negotiation over your life. Yeah. It's it must be interesting. I mean, I hopefully
• 1:35:50
  not a lot of people that are listening to this have ever gone through it. I don't recommend it.
• 1:35:53
  But you're actually just like like what is it? What are the thoughts that are going through your
• 1:35:57
  head when you're dealing with this whole process? I might be fucked. That's that's what I'm thinking.
• 1:36:02
  I my entire life could be ruined right now. I can miss decades of my life. You know, I can miss
• 1:36:08
  my daughter growing up. It's I may have just royally fucked myself over in my entire life and
• 1:36:14
  let everyone down. That's that's what was going through my head. And so you agreed to pleading guilty.
• 1:36:19
  Of course I would agree to pleading guilty. That was not me really much of a choice.
• 1:36:24
  Even if I wanted to fight them, I didn't have the money to fight them in court. Because as my lawyer
• 1:36:28
  said, I didn't I couldn't afford much justice. This was kind of a bullshit charge. Like it seems
• 1:36:34
  like it was a bullshit charge because it's just covering everyone's eyes. Looking back, you still feel
• 1:36:39
  that. Yeah, I mean, if they really cared about it, they would have brought charges against us when
• 1:36:47
  they first found out about it. Not six months later, right after the New York Times article got
• 1:36:52
  published. The timing there was just too suspicious. You know, it wasn't like they were preparing
• 1:36:56
  to bring charges. And then they just happened to be ready one week after the New York Times published.
• 1:37:01
  That's unlikely. It's they probably prepared that the case. They're like, you know, we could
• 1:37:07
  bring this case. Maybe we shouldn't bring the case. The army seems to feel this is important
• 1:37:12
  that this continues. So we'll kind of let it slip under the rug. You know, no harm. No foul.
• 1:37:18
  But until there was until it became a political football until it became a scandal. And then everyone
• 1:37:24
  career bureaucrats need to cover themselves. That's that's kind of how.
• 1:37:29
  How do you prep for this? I mean, you have a you have a kid. You were married at the time.
• 1:37:35
  So how are you prepping for this like going into this? Because at the end of the day,
• 1:37:38
  you got seven months probation or house arrest. How's the rest? How do you prep for this kind of
• 1:37:44
  event? You mean like this is like the sentence saying like, it's the whole of the whole like
• 1:37:48
  walk me through that. Right. So the way it worked was they brought about like a week
• 1:37:54
  after the New York Times article got published. They brought charges against us. You know,
• 1:37:59
  we negotiated. We pled guilty. Ephraim took, Ephraim tried fighting them for another like
• 1:38:04
  few months, but then realized that it was lost cause. You think that's why you bought more time?
• 1:38:08
  No, no, there's a reason why he got more time than me. And there's that's a whole other story.
• 1:38:14
  It's actually kind of a funny story. But to me, not to him, I'm sure. But so I'll get to that.
• 1:38:21
  Yeah, no, I'm dealing with it. So Alex and I pled guilty immediately. I really have a
• 1:38:28
  choice. Ephraim tried to fight him for another few months. Eventually he pled guilty too because
• 1:38:33
  he realized the evidence against him was too strong. But Ralph decided to take it to court,
• 1:38:40
  our investor. And because he decided to take it to court, they didn't want to sentence us
• 1:38:48
  until his trial was over. Because in case they wanted to call us as witnesses in his trial,
• 1:38:54
  they wanted to have leverage against us. They didn't want to sentence us.
• 1:38:58
  So we were kind of stuck in limbo until his whole trial was over. He went to trial twice. The
• 1:39:04
  first time was a hung jury. Then they did the whole thing again and finally convicted him.
• 1:39:09
  Took three years that entire process. So during that three year period, the prosecutors told us,
• 1:39:17
  you guys have to stay out of the arms business. You can't do government contracting.
• 1:39:21
  And my lawyer told me, go get a job that will make you look good to the judge.
• 1:39:26
  And so I got a job at a nonprofit at a food bank. Yeah, that's about as good as you.
• 1:39:32
  Exactly. I was terrified. I was looking at decades in prison. I got a job at a food bank.
• 1:39:40
  I went back to school, started studying mechanical engineering. I even started doing massage therapy
• 1:39:48
  again. You're just praying for what's on the other side. Exact hammer that's coming down.
• 1:39:51
  I didn't know how long this process was going to take. I was hoping my lawyer said,
• 1:39:57
  oh, it could be anywhere from six months to a couple of years. You don't know.
• 1:40:01
  Exactly. And so I did that. And Ephraim has a hired tolerance for risk. So he officially shut
• 1:40:15
  down his arms business. But he had his newest lackey. So after I quit, he hired someone else
• 1:40:22
  to take over my job. He ended up screwing that guy over too. That guy quit. And then he had
• 1:40:27
  another guy who replaced that guy. That guy. He got to start a company under his own name.
• 1:40:33
  And he started doing the arms business under his lackey's name, corporate name,
• 1:40:40
  using it as a proxy. Exactly. As a proxy. He tried to do this. But the thing is when he's a
• 1:40:44
  real control freak, and he's really good at negotiating. So when it came down to actually
• 1:40:49
  negotiating the deal, he'd grab the phone and start talking himself. And so he tried to do this
• 1:40:56
  deal with a with a gun dealer who's based out of central Florida. The gun dealer,
• 1:41:02
  after he started talking directly to Ephraim, realized who Ephraim was. And he called up the ATF,
• 1:41:11
  now called tobacco firearms administration who regulates firearms in the United States,
• 1:41:16
  called up the ATF and told him, hey, I have this because Ephraim was in the newspapers and all that.
• 1:41:21
  See, it's like, I have this convicted arms dealer who's trying to do an arms deal with me.
• 1:41:24
  What should I do? Because he probably thought Ephraim's trying to entrap him into something to
• 1:41:27
  get a reduction on his sentence. You're very reasonable assumption. And so the ATF tells him,
• 1:41:35
  well, why don't you introduce one of our undercover agents as your partner? The gun dealer does that.
• 1:41:41
  And undercover agent tells Ephraim, you know, I'm the kind of guy who needs to look you in the
• 1:41:46
  eye and shake your hand before we do a deal. And Ephraim goes, oh yeah, I'm that kind of guy,
• 1:41:52
  two years, how men do business, you know? And he's like, he's like, he's like, so why don't you
• 1:41:58
  come up to the Orlando area and we'll meet and we'll close this deal. And, you know, and he knew
• 1:42:03
  that Ephraim was out on bond and not allowed to leave the Southern District of Florida.
• 1:42:08
  That would not allowed to do business. And definitely not allowed to do this kind of business.
• 1:42:12
  And so Ephraim's like, okay, I'll be up there next weekend. You know, so he goes up to the to meet
• 1:42:19
  the agent, not knowing he's the undercover agent, right? And the undercover agent meets with him,
• 1:42:24
  pops the hook, the trunk of his car. And he says, hey, check that out because he knew that
• 1:42:29
  Ephraim was already a convicted felon right because he had pled guilty. And in the United States,
• 1:42:34
  it's illegal for a felon to be in possession of a firearm. You can get up to 10 years in prison,
• 1:42:41
  just for picking up a gun as a convicted felon. Now, it's also illegal for someone to knowingly
• 1:42:47
  hand a felon, a firearm. So what he does is he pops open the trunk of his car and he says,
• 1:42:53
  check out that gun I've got in there. It's the latest, greatest HK on the market. And Ephraim
• 1:42:59
  who's a gun nut says, oh, I heard about that thing. Let me see that. Let's go to the range and
• 1:43:04
  fire off a few rounds. What can I say? Once a gun runner, oh, is a gun runner? Am I right?
• 1:43:12
  The agent slaps the cuff son of him. He's really, you're a felon in possession of a firearm.
• 1:43:17
  And you're under arrest. And he could have gotten 10 years for that because he
• 1:43:21
  violated the terms of his bonded and give him another bond. So he had to spend like a year in
• 1:43:26
  county jail in central Florida, which is no picnic. And eventually, he could have gotten five,
• 1:43:33
  he had, and he had invalidated his plea agreement, right? Because part of the plea agreement,
• 1:43:38
  you make when you plead guilty, it's an agreement with the prosecutors. He's very sentencing.
• 1:43:42
  This is pre-sentencing, right? Ralph had not been finished his trial yet. So he hadn't
• 1:43:45
  been sentenced for the gun for the fraud charge. And part of the plea agreement is you will commit
• 1:43:50
  no more crimes before you get sentenced. Because how are the prosecutors going to tell the judge that
• 1:43:56
  you're a reform individual? You know, you're a good citizen from now. And if you're going out there
• 1:44:00
  and committing more crimes before you even get sentenced. So he invalidated his plea agreement.
• 1:44:05
  The prosecutors said, oh, you should throw the book at this guy. He respects, doesn't respect the
• 1:44:10
  law. And he needs to learn a lesson. So he could have gotten five years total for the fraud
• 1:44:17
  charge that he had pled guilty to another 10 years for the gun charge. He hired the best lawyers
• 1:44:22
  in Miami. They negotiated hard. They got it down to four years. So instead of 15 years total,
• 1:44:28
  he ended up getting sentenced to four years for both things. He ended up serving like he
• 1:44:33
  three and a half years got out for like good behavior drug program. And now he's out at about
• 1:44:38
  on the streets of Miami, screwed people left and right. You think so? Oh, I know so. Because he,
• 1:44:45
  I every few years, I get someone call me up. And they're like, I made a big mistake of going
• 1:44:49
  into business with him. And now I have to sue him because he just screwed me in this that in the
• 1:44:53
  other way. And nothing's changed. Nothing's changed. He's the same guy. He's the same exact guy.
• 1:44:58
  What businesses does he do now? So from what I've heard, he is in the business of financing lawsuits.
• 1:45:06
  Because so many people have sued him. And he's sued. He's done a whole bunch of frivolous losses.
• 1:45:11
  He sued. I think it was like Glaxo Smith climbed the big pharmaceutical company
• 1:45:15
  because he claims his psychiatric medication turned him into a drug sex and gambling addict.
• 1:45:22
  And that he lost millions of dollars doing all that. While he was waiting sentencing,
• 1:45:28
  he's from what I you can sue a drug company for that.
• 1:45:33
  Well, I don't know if he was successful, but he did sue them.
• 1:45:35
  But you probably look it up. Yeah, yeah. You probably didn't look it up.
• 1:45:38
  Yeah, yeah. That's wow. Yeah. So at least it's crazy what you can sue for.
• 1:45:42
  Oh, you could sue for anything. I'm Canadian. This is very, I don't think I know anybody that
• 1:45:46
  sued anybody for like having too much fun on the weekend for us to anyone. So he got really good
• 1:45:51
  at suing and being and he got really good at getting out of lawsuits because he screws everyone
• 1:45:55
  over. You know, so he everyone sues him eventually. And so he got to know the legal system really
• 1:46:01
  well. And so now he finances lawsuits. And I have no doubt that the deals he makes,
• 1:46:06
  it probably he gets like 90% of the winnings and then he figures out some way to screw the guy out
• 1:46:11
  of the last 10%. So, you know, because that's just how he rolls. So that's what he does now.
• 1:46:16
  I've heard he's trying to get into some other businesses, but I don't know, you know,
• 1:46:19
  whether you're going to invest. Yeah, them. I would not recommend anything to go into business.
• 1:46:24
  Have you spoken to him since the only time I spoke to him since he went to prison was,
• 1:46:29
  uh, I sued him years later and we who went through a deposition. And so there, so I saw him
• 1:46:37
  in a room in a deposition where we had our lawyers in the room. We ended up settling, you know,
• 1:46:43
  for way less than I should have just because the there was some evidence that had been that
• 1:46:51
  mysteriously disappeared that made my case weaker. And it was going to cost me a lot of money
• 1:46:55
  to do an investigation. I didn't want to like spend the time. I was already moved on to other
• 1:47:00
  businesses and I just wanted him out of my life. So, so yeah, we ended up settling for a tiny
• 1:47:04
  fraction of what he owed me, but, uh, and the truth is, I don't regret it because I'm just glad
• 1:47:10
  he's not in my life anymore. Yeah, that's, uh, that was a hectic year and a half. Yeah, yeah, it was.
• 1:47:16
  And then three years fall out, three years fall out. So I got sentenced, but, uh, I,
• 1:47:21
  so I got sentenced to seven months of house arrest, which is probably like the best possible.
• 1:47:25
  It was the, I was, I felt extremely fortunate. Yeah. Did you, uh, spend any time in jail at all?
• 1:47:31
  Uh, just so when they, when they brought charges against us, uh, you have to go in to, uh, to get
• 1:47:38
  the judge to issue you a bond. So they have like a way to, you know, to get you back in court if
• 1:47:44
  they want to. And so, but they didn't, it wasn't like in the movie where they sent the FBI to our house
• 1:47:51
  to arrest us. We are already in negotiations with, uh, with the prosecutors through our lawyers.
• 1:47:56
  So the prosecutors, uh, told us, oh, just do a self surrender. They call it. So you just walk down
• 1:48:01
  to this. This is a non-violent non. Yeah, yeah. Exactly. When they don't think that you're a flight
• 1:48:06
  risk. Yeah. So if they don't think you're a flight risk and you haven't committed anything violent
• 1:48:11
  or anything like that, they'll, and you're already in cotton. It's not going to be a surprise.
• 1:48:15
  You know, they, you're already in negotiations. They'll be like, you could self serve, they give you
• 1:48:19
  the option to self surrender, they call it. You just walk down to the courthouse. They kept, they come
• 1:48:24
  in, in like a little holding cell for a few hours. They put you in cuffs. Yeah. And you walk out to
• 1:48:29
  the judge. The judge looks at your case as, okay, your bond is X amount and, you know, so they did
• 1:48:34
  the same thing for him. Um, but then later on, he got arrested, you know, through the, the
• 1:48:41
  sting operation with the ATF and then they kept him in jail. New thing he would have gotten same
• 1:48:45
  amount of jail time as you if he wasn't an idiot. I think he would have gotten more than me just
• 1:48:49
  because he was the ringleader and the, you know, the kingpin, they call it, but he definitely
• 1:48:53
  would have gotten a lot less than four years. Yeah. 100%. If I had to guess and it's just a guess
• 1:48:59
  because you don't know what the judge would have given him, he probably would have gotten a year.
• 1:49:03
  And that's, that's what I think he would have gotten. So seven years house arrest. This is when
• 1:49:07
  you said our 70, sorry, am I going to seven months house arrest. This is when you start to figure out
• 1:49:12
  what's next in your life. Exactly. It was when you started. Yes. Other businesses. Yeah,
• 1:49:16
  correct. Yeah. It was actually so the house house arrest turned out to be one of the biggest
• 1:49:20
  blessings in my life. It's kind of funny how that goes. You know, uh, I was under house arrest
• 1:49:26
  and which I felt very, very lucky to get, uh, because house arrest is heaven compared to prison.
• 1:49:31
  House house. People do some people do anyways. Exactly. Exactly. It's you have your own,
• 1:49:36
  yeah, you can watch TV. You have your own refrigerator, your own bathroom, you know, very important.
• 1:49:41
  Don't have to worry about dropping the soap, you know. So, um, yeah, I felt very, very lucky that I
• 1:49:48
  got only that I avoided prison. Uh, you know, got to spend a lot of time with my daughter, which
• 1:49:53
  was really nice. Uh, but I was bored. You know, as I played a lot of guitar, I'm a guitarist. So,
• 1:49:58
  and it wasn't like a COVID style house like lockdown where people can't visit you.
• 1:50:04
  That a lot of my musician friends come over. We jam. It wasn't so bad. But of course, no drummer is
• 1:50:08
  going to bring his drum set over my house because it's a massive pain to move a drum set.
• 1:50:13
  So I really miss playing with the drummer. So, uh, you know, the drums are give the, the music,
• 1:50:17
  the energy, you know, you dance to the beat. So I bought a, uh, a drum machine, which is this
• 1:50:21
  electronic device. It goes on the table. It's mainly designed to compose beats. It's got a bunch
• 1:50:27
  of buttons on it. Each one makes a different drum sound. You can make the beats on it. And then
• 1:50:30
  it plays it back in a loop. It's what like a producer would use. Yes. Exactly. It's what producers
• 1:50:34
  use to make beats. Yeah. Uh, but I was using it. So I'd have beat to play to with my guitar.
• 1:50:40
  But every time I wanted to change the beat, like when you go from verse to chorus in a song,
• 1:50:43
  the beat gets usually guitar. So I'd have to stop playing my guitar, press the button on the
• 1:50:48
  machine to change the beat and go back to playing my guitar and interrupted the flow of the music.
• 1:50:52
  And I was like, this really sucks. I wish I could do that hands free. Like I, I wanted a drum
• 1:50:57
  machine in the form of a pedal on the floor. So I could control it hands free. And so I went,
• 1:51:02
  I was sure someone made something like this. So I went online to look for it. And I couldn't find
• 1:51:06
  anything. And I asked my musician friends if they'd seen anything like that. And they're like,
• 1:51:10
  I'd never seen anything like it. But when you find it, let me know because I want one too. That's
• 1:51:14
  not super cool. And so I thought if nobody's making it, everybody wants it. You know, I should
• 1:51:20
  make this thing. And I, of course, I'd never made any electronic product in my life. I'd never
• 1:51:27
  developed anything. So I knew nothing about it. So I started googling, you know, how to develop
• 1:51:32
  electronic products. And I found a whole bunch of engineering firms that promise to take your
• 1:51:37
  idea from napkin sketch to store shelves. That was the, that was the, that was a good fit.
• 1:51:41
  Yeah, it's a good fit. But there were a lot of them. And I didn't know which one to pick
• 1:51:46
  and the price ranges were like all over the place. It was like, for this particular product,
• 1:51:52
  I ended up calling it the beat buddy, like your buddy that plays the beat. And it was like,
• 1:51:57
  I got the lowest price was like $30,000 to develop it just for the engineering, not manufacturing.
• 1:52:04
  The highest price was about $300,000. So so I had about at this point at about like $25,000 saved up
• 1:52:13
  from like doing massages. And because I had spent all my money on lawyers to keep me out of
• 1:52:19
  prison. And even to plead guilty, it cost me 30 grand. Really? Yeah. Yeah. To do the
• 1:52:25
  negotiations. Yeah, to listen to your dad and I just get, you know, it's, I've, in business,
• 1:52:32
  I've met lawyers who charged like $1,500 an hour. And I'm like, no engineer in the world
• 1:52:38
  charges that much. I mean, when the horses are so silly. Yeah. If you can't agree, yes, you're
• 1:52:42
  going to spend, I mean, the lawyers get all the money. It's incredible. The lawyers always win.
• 1:52:46
  The lawyers win. Yeah. Yeah. So anyway, I had no idea which one to pick. So of course, I made
• 1:52:53
  the classic mistake just going with the cheapest guy. He ended up wasting like nine months ended up
• 1:52:58
  not. I realized he wasn't going to build it. I managed to get my money back because I had hired
• 1:53:04
  him through it was called ODesk, which is similar to Upwork, like one of these sites. And so I had
• 1:53:10
  some leverage on him. But then I realized, you know what? I'm going to pick the guys who seem like
• 1:53:16
  they are the most competence instead of the cheapest. And it wasn't even the most expensive.
• 1:53:21
  These guys were like 130 grand. They're Canadian company actually out of Montreal. And they,
• 1:53:28
  but of course, I didn't have 130 grand. So I told them that. I'm like, yeah, I only have 25 grand.
• 1:53:33
  And but I'm planning on doing the crowdfunding campaign to do manufacturing.
• 1:53:38
  So they told me, look, we really want to get into this field because all of our other projects
• 1:53:42
  have been for like big companies B2B or governments. And we want to do something consumer facing.
• 1:53:48
  And this is a super cool product. And the founder of their company, the lead engineer was a drummer.
• 1:53:55
  And he's like, I know this is going to do really well because I have so many friends want to jam
• 1:54:00
  with me. And I don't have time to jam with them because I'm running an engineering company.
• 1:54:03
  But they're going to love this thing. So he made me a special deal, which is an incredible deal.
• 1:54:07
  I'm very grateful for it. I gave them all my money pretty much every penny I had 25 grand as a
• 1:54:12
  down payment. And they built me a functional prototype that I could then take to crowdfunding.
• 1:54:18
  And the deal was I would use the crowdfunding money to pay them back. They held the engineering
• 1:54:23
  files as collateral so that I couldn't run off and not pay them. And if I, I would use the crowdfunding
• 1:54:28
  money to pay them back. And if I didn't make enough money on the crowdfunding, they would do
• 1:54:33
  the manufacturing and get a cut of the profits until they got paid back everything. Yeah.
• 1:54:38
  Which was an incredible deal. And that made me feel really confident they were going to do a good
• 1:54:42
  job because if they didn't make a functional product, they weren't going to get paid the rest of
• 1:54:46
  the money. So I was like, these guys are going to do the job. And they did an amazing job.
• 1:54:52
  And so I created that product. The crowdfunding campaign raised $350,000 in one month.
• 1:54:58
  How do you know? Because that's a great crowdfunding campaign that's super. And your past entrepreneur
• 1:55:03
  experience, I mean, really, you haven't had to find product market fit for anything yet
• 1:55:11
  until this. But usually when, I guess it's because you solved the problem you had, that was
• 1:55:16
  solved the, that was probably what allowed you to do. I knew I wanted it. And I knew I wanted it
• 1:55:22
  really badly. I was like, this would be so much fun to play with. And I could use it to practice
• 1:55:28
  at home to write songs to do like little one man band gigs like in coffee shops. Like I'm
• 1:55:33
  and every musician I talked to about it was like, that's a great idea that I can't believe nobody's
• 1:55:38
  made that. That was the, those are the same line. I can't believe it. He's like, are you sure nobody's
• 1:55:42
  made anything like the boards that lying? Yeah. People were like, are you sure nobody's made?
• 1:55:46
  I thought I saw something. I'm like, oh, find it. Let me know. And nobody, they're like,
• 1:55:50
  everyone thought someone made it, but no one actually made it. So I knew, I knew that it was
• 1:55:56
  going to be a successful product. And my only question was how much it was going to have to cost
• 1:56:03
  and whether people would be willing to spend it. And for that, I got a whole rate because I'd
• 1:56:07
  ask every musician I talked to about him, like, what would you pay for this? And I got everything
• 1:56:11
  from like, I wouldn't pay more than a hundred bucks to I'd pay, oh, this is awesome. I'd pay
• 1:56:15
  500 bucks, or even some people said a thousand dollars. And then it turned out that I had to,
• 1:56:20
  to make it profitable. I had to, it had to be around the, a little under $400. And which was still
• 1:56:26
  in the range. And luckily, most musicians thought that was, that was a great price point. And,
• 1:56:34
  and this was like, and we did our crowdfunding campaign in early 2014, almost 10 years ago.
• 1:56:40
  And, and it just like took off. So the, you know, I posted in the, it wasn't even me, like,
• 1:56:46
  other people were really excited about it. And they, they posted in like all the musician forums
• 1:56:52
  and Facebook groups. I want to take a second and thank Range Rover Sports for supporting today's
• 1:56:55
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• 1:57:01
  everybody who's listening today, who has taken risks, who has upleveled their personal professional
• 1:57:06
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• 1:57:12
  when the thing you're trying to build, the challenge that you're taking on, it finally starts to
• 1:57:17
  take off. There is like this rush of excitement and possibility and that feeling, that feeling
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  that you get when you get behind of the wheel of a Range Rover Sport, because we've all had that
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  perfect drive when the road, the car, and you, you're all in perfect harmony. But that's not just
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• 1:57:40
  Sport is not just for impressing others, it's how you feel behind the wheel. It's how you feel
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• 1:58:00
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• 1:58:10
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• 1:58:28
  So you tap into these super niche communities and that's actually the best kind of marketing.
• 1:58:33
  When you have your customers marketing it for you. And I think that everything you did,
• 1:58:38
  it's so funny because so many people go through so many versions of entrepreneurship and so many
• 1:58:42
  failures before they figure out some of these things that happened for you or because of you or
• 1:58:47
  whatever. But a lot of people are forcing products on the market and there is no product market
• 1:58:55
  and there is no customer base and you're doing all the right things. I mean, good on you for
• 1:58:58
  figuring this out. But I mean, you're interviewing people, you're speaking to the customer,
• 1:59:02
  you're solving your own pain points, you're finding these niche communities that nobody that
• 1:59:07
  will market for you and evangelize your product for you. So it's very smart, very, very smart.
• 1:59:13
  Because I don't think a lot of people intuitively do that when they try and start really their first
• 1:59:17
  product company. Right. Yeah, it just made sense to me. Very time. Yeah. So yeah, I mean, I think the
• 1:59:25
  idea of the product was strong enough that it sold itself. And I think that's why it was so successful
• 1:59:31
  because it addressed such a need in the market than nobody else was doing. So yeah, so that was
• 1:59:37
  my first product, my first invention. I got a patent for it in less than a year, which was
• 1:59:42
  unbelievable. Usually it takes like two to three years. And that was how I launched my company
• 1:59:48
  Singular Sound. And since then, I've created a whole bunch of other music related products
• 1:59:54
  for the musicians out there. I've made the world's most advanced looping pedal. It's called the
• 1:59:59
  Aeros Loop Studio. And it talks to the beat buddy. And you know, you can like, they talk with
• 2:00:05
  MIDI to each other. So everything's like lined up the loops and the beats. And we also created
• 2:00:11
  one of the best MIDI foot controllers, which controls the other products. We also created the
• 2:00:16
  Cable, which is this cable winding device because it's all for issues I had. Like I was playing
• 2:00:21
  shows and I had a whole bunch of cables. And it was taking me forever to wrap it on my, I'm like,
• 2:00:24
  I need just a little wheel that I can wrap it up. And so yeah, so that was like, that's our cheapest
• 2:00:29
  products, like a $20 product. And when you when you try to build a business like this, so you crowd
• 2:00:34
  funded, you got some initial traction. I mean, like we don't do it through every single component
• 2:00:39
  of building a business. But when you think about like sales marketing distribution, what was the
• 2:00:44
  strategy that worked really well for you? So we started because we started with crowdfunding.
• 2:00:49
  We started with direct to consumer, right? So like even after the crowdfunding campaign ended,
• 2:00:54
  we continued taking orders on our website. And by the time we actually manufactured and
• 2:01:01
  delivered the product, we had, I think we had, we went from like 350,000 in sales in that first
• 2:01:08
  month to about like a million and a half, like like eight months later on that. Yeah, yeah,
• 2:01:14
  knows that's pretty year one. Yeah, year one. And before the product even hit the market. Yeah,
• 2:01:18
  that's actually not bad. Yeah. Yeah. Yeah. Which was so that gave us enough money to do the
• 2:01:23
  manufacturing. I spent like three months in China to make sure they were doing it. It was supposed
• 2:01:27
  to be one month, but that's how it goes. You know, to spend a lot of time in China to do the
• 2:01:31
  manufacturing. And we delivered the first beat, but a unit to customers almost exactly 10 years ago.
• 2:01:40
  And we're actually about to release our 10 year anniversary edition. It's going to be really
• 2:01:45
  cool. How's the business? So how is the business grown? Yeah, because that's a, that's, yeah,
• 2:01:49
  you have production in China. You have to manage that supply chain. I'm assuming that it's a,
• 2:01:54
  it's a hardware business. So it's not like super high margins compared to other types of
• 2:02:00
  businesses is software. Yeah. So like, how have you grown that? But like, like, think about like
• 2:02:06
  the main strategic items that really help take that business to where it is today. Right. So it's,
• 2:02:12
  we started with the beat buddy as our core flagship product. And then we kind of built from there
• 2:02:17
  on, and my, where the strategy I used was when people would say, oh, I really wish I had like
• 2:02:26
  our customers would say, I really wish I had this. So the way I came up with the Aero Sloop Studio,
• 2:02:31
  for example, was people were like, the beat buddy's awesome. It's an amazing drum machine. I'm trying
• 2:02:37
  to sink it to my looper pedal, right? A looper pedal for people who don't know is a device that
• 2:02:42
  records your instruments music and plays it back in a loop. And if that loop isn't the same length
• 2:02:49
  as the, as the beat loop, then they go out of sync every time they cycle around. And then it sounds
• 2:02:53
  like shit. So you, uh, there are, there is a protocol, a digital protocol called nitty,
• 2:02:59
  where which musical devices use to talk to each other. But the loopers on the market,
• 2:03:05
  they weren't particularly good at this sinking device. So they're sinking system. So people were
• 2:03:11
  complaining, oh, you know, I wish I could do this, this, this, and this with my looper pedal,
• 2:03:15
  but I can't, right? Like, you know, I wish when I switched, uh, uh, song parts from verse to
• 2:03:21
  chorus, it would go to a different loop because, you know, it doesn't make sense. But you're talking
• 2:03:24
  to customers the whole time. Yeah. Yeah. Yeah. You, you build these feedback loops. Exactly.
• 2:03:28
  Exactly. Exactly. Yeah. Because we sold mainly directly to consumer rep first. We had a pretty
• 2:03:33
  big mailing list. And, uh, and we also created a forum on our website where people can interact
• 2:03:39
  with each other because the beat buddy, you could put your own content on there too. You could make
• 2:03:44
  your own beats. You could make your own drum sets. Uh, we have software that you could organize it
• 2:03:49
  into the beat buddy format. So people make a lot of content, make a lot of beats and drum sets,
• 2:03:54
  and they post it on the forum for other people to download. So there's a lot of constantly evolving
• 2:03:59
  and increasing content. We also make professional stuff that we build the whole community around.
• 2:04:03
  Exactly. We built a whole community. So we get a lot of feedback through that community. A lot
• 2:04:08
  of feature requests more than we can ever work on. But, but, you know, but, but occasionally we'll be
• 2:04:14
  like, oh, that's a good idea. That's a good idea. And then we kind of like sift through all the
• 2:04:18
  requests. And we're like, okay, this is going to make the biggest difference to the community
• 2:04:21
  to the customer base. And that's kind of how we decided development goals. And, um,
• 2:04:26
  so that, you know, people were complaining about the loopers on the market. How they were difficult
• 2:04:29
  to use. They weren't functionally working well. And so, and I, that I'd never done looping because
• 2:04:36
  I'm a singer songwriter. I'm more like singing and doing songs, covers and stuff like that. So
• 2:04:41
  looping is more of like an instrumentalist kind of thing. So, uh, I'd never really done looping,
• 2:04:46
  but I bought a few loopers to test it to see because people were complaining about it. And
• 2:04:50
  it was just such a pain to use these loopers. I'm like, oh, I could easily make a way better
• 2:04:55
  looper than this. It's like, like just the biggest, uh, exact feature that's noticed that
• 2:05:00
  people realize that made me realize this was, um, loopers, right? They, uh, before we came out with
• 2:05:08
  our product, uh, they didn't have like any screens on them, right? So when you record a loop,
• 2:05:13
  especially if it's a long loop, you kind of have to know where that seam where the loop ends and
• 2:05:18
  begins because like, let's say you're switching to a different loop, it'll only switch at the end
• 2:05:22
  of that loop. And if you have a song, like if it's a rhythm section, that's the same few chords
• 2:05:26
  a few times over, you can lose track of where you are in the loop. And then you think you're over
• 2:05:31
  at like the second measure, but you're really on the fourth and, and then you'll mess yourself up.
• 2:05:35
  So I realized, well, there's already like these, uh, um, you know, Dawes, right? Digital Audio
• 2:05:40
  Workstations where you see the wave form on the screen. Why don't we just put that in the looper
• 2:05:45
  so you could actually see what you're recording and see where, how close you are to the end of the loop
• 2:05:49
  and gives you that visual feedback. And so that was like the big innovation that, uh, we came up with
• 2:05:54
  for the Aorus Loop Studio is that it's a actual visual looper. That's, that's one thing. It was,
• 2:06:00
  we've had very wide a few different things. And that's right. Like when you think about these
• 2:06:03
  new inventions that you bring into your product line, are there, are there outside of speaking to
• 2:06:08
  your customers? Because again, you get so many different feature requests and product requests.
• 2:06:11
  Is there a signal that one is going to be a hit? Like, like, how do you measure that signal in
• 2:06:16
  the market? Sorry that one is going to be an absolute hit. And that's what you focus your time and
• 2:06:19
  energy on. Yeah. It's, um, it really goes to like how many people are asking for this? Like what,
• 2:06:27
  like, how big is the pain point? Right? And how big is the market? Really? Right? And it's
• 2:06:32
  sometimes a little difficult to tell to, uh, assess the size of the market, especially in the niche markets.
• 2:06:39
  So the, we've done very well, you know, in, uh, it's a multi-million dollar business now singular
• 2:06:46
  sound. Um, and we've won a whole bunch of industry awards and a lot of famous musicians use our
• 2:06:51
  products. And it's really kind of, we have a pretty good reputation in the market. Um,
• 2:06:57
  and we've done that because, uh, we've addressed the common complaints that musicians have
• 2:07:04
  about products. So people have been complaining for years about how drum machines are too
• 2:07:09
  complicated and, you know, not easy to use. And you have to read a huge thick manual and nobody
• 2:07:14
  will like, nobody likes to read, right? Except as a Germans, the Germans love to read manuals.
• 2:07:17
  There's the rest of the world here, right? Especially Americans read any manuals. It's either, uh,
• 2:07:22
  you know, like a quick start video. Yeah. And I said, yeah, I don't even want to read anything.
• 2:07:27
  So you have to make it super dead simple to use. Um, and so, uh, that, that's kind of how we address
• 2:07:34
  things. When we see a lot of complaints in the market, and I have an idea to address that issue,
• 2:07:39
  if there's enough complaints about it, uh, then I know it's a good thing to work on. But the issue with
• 2:07:45
  the, and I'm not complaining because we've done so well in the niche, but my brother who helped me
• 2:07:50
  build singular sound. So I'm, I'm one of nine children. And so, um, after my whole falling out with
• 2:07:56
  Ephraim, I was like, uh, I was like so traumatized from like having such a bad business partner. I was
• 2:08:01
  like, I need someone I could trust. And so I partnered with one of my brothers to help me build
• 2:08:05
  singular sound. He's not a musician, but he's a very methodical organized person. And so he,
• 2:08:11
  like I had the idea and he would break it down into steps and sub steps and like he's like one of
• 2:08:15
  those PB, he loves spreadsheets. He's like one of those guys. So useful. I really am my kind.
• 2:08:20
  Neck. Me, we all, we all play our role. Yeah. So I can't deal with spreadsheet. Not very
• 2:08:25
  useful, but you, but it's good to be partners with someone who does. Yes. Correct. Uh, so he,
• 2:08:30
  so he helped me build singular sound. And we're, we had a great partnership, but he was always
• 2:08:35
  complaining to me that that are, we're in a niche business. And there is only so far you could grow
• 2:08:40
  because only like 10% of people are would consider themselves musicians and maybe 10% of musicians
• 2:08:46
  want to get really high-end, you know, sophisticated gear like what we make. So our addressable
• 2:08:52
  market is like 1% of the population. Um, when we still done, have done very well because we filled
• 2:08:57
  that niche very well. But he was always complaining to me, we need to get, we need to invent something for
• 2:09:03
  the mass market. And so more crowded. Yeah. It's more crowded. But if we can come up with something
• 2:09:09
  innovative, the market size is literally a hundred times bigger. And so we were hanging out at
• 2:09:14
  my house a few years ago. And we, uh, we were, we were smoking some weed. And we got the
• 2:09:22
  munchies and we ate, uh, we ate some mango because mangoes sweet and delicious. But of course,
• 2:09:27
  you get the fibers of the mango. Of course, uh, why can't you? Yeah, you can go. That is literally
• 2:09:31
  the only reason I can't stand that. Exactly. It's so annoying to get out of your tea bag. Exactly.
• 2:09:35
  And so afterwards, he asked me for some dental floss. We'll go to my bathroom to floss our teeth.
• 2:09:39
  And I complain like, oh, this is such a pain in the ass. I hate flossing. If we could invent a
• 2:09:44
  machine that flosses your teeth for you, that would do. And he looks at me, he's like, oh my god,
• 2:09:49
  everyone would buy that. We have to come up with something. And so we started spitting,
• 2:09:54
  bawling ideas. Eventually, we landed on a product on a design called, that we called
• 2:10:00
  insta floss, like Instagram, but flossing. And here, I actually have a, uh, one of the,
• 2:10:04
  our big, our big innovation is the head, right? So let me see that. Yeah. Honestly,
• 2:10:10
  here. I'm so curious. Yeah. Yeah. How does this work? So, so this is just the head. Oh,
• 2:10:14
  all right. Yeah. Yeah. What is it? Yeah. Yeah. Yeah. This is just the head. So it's a water
• 2:10:27
  but it's just a single stream of water. And the problem with the water pick is that you have to,
• 2:10:32
  you have to do it 90 degree to the gum line because if you go into the gum line, it irritates your
• 2:10:36
  gum. If you go down, it does not affect it. So if you go 90 degree to the gum line, you have to
• 2:10:40
  trace your gum line, uh, you know, the gum line top bottom and even more difficult on the inside
• 2:10:46
  pointing out to get a complete floss. And most people, when they use this, they, uh, you know,
• 2:10:53
  they, they make, they spray, they make a big mess. And they're like, by the way, I, I have
• 2:10:58
  you on. Yeah. And not only have we stopped using it because the little spray thing snapped off
• 2:11:03
  besides that. But when I did use it, like the, the bathroom would be like just water,
• 2:11:09
  ever, you have water everywhere. Yeah. And so that, that's the problem with, that's why most people
• 2:11:14
  don't use water flossers is because it makes a big mess unless you use, you learn to use it
• 2:11:19
  properly. And it has a bit of a learning curve and it takes some time, you know, so what we did
• 2:11:24
  is we created this thing, which uses like an H shape manifold. And we have to, instead of one water
• 2:11:30
  jet, we have 12 water jets pointing on either side of the tooth, top and bottom. So all you have to
• 2:11:35
  do and understand is that you just feel like this. Yeah. Yeah. All right. Yeah. All right. You
• 2:11:41
  will. And that's it. That's so, so I'm buying it. And it gets you totally buying what it gets
• 2:11:46
  top bottom and both sides of the tooth outside and inside all at the same time. And so you could
• 2:11:52
  have a complete effective, comfortable floss in 10 seconds without making a huge mess. You just
• 2:11:56
  lean over the sink and all the water goes down in the sink. How do you, like, I mean, you have
• 2:12:00
  the idea to tackle this market. Yeah. I find, I find inventors fascinating because it's like,
• 2:12:07
  you have to figure out the mechanics of building this physical thing. I come from a software world
• 2:12:13
  where you can, you, you create software to solve a problem. But it's like, it's like a, it's
• 2:12:17
  usually like a workflow problem in somebody's business, for example, this is like, you have to find
• 2:12:23
  a physical thing and you have to find the right, I mean, in software, it's like servers, servers
• 2:12:27
  and code. That's it. You, for this, you got to find material, you got to find supply chain, you
• 2:12:32
  got to find material manufacturer and you got to source that from. So the insta floss was the hardest
• 2:12:39
  product I ever worked on. By far, like, even though like the beat buddy is a sophisticated product,
• 2:12:44
  it's like a little computer in a, in a pedal and it has firmware and software and it's electrical
• 2:12:51
  design and all that. But insta floss was actually way harder because there were so many details
• 2:12:58
  that we had to figure out. First of all, we had to figure out if it was effective, right?
• 2:13:02
  The way this is going to be gross. But the way we, the way they do tests on dentist dental items,
• 2:13:08
  they use pig's teeth because pigs actually have very similar teeth to humans, strange but true.
• 2:13:14
  And so we went to a butcher shop and we bought the pig heads and we had them cut it lengthwise.
• 2:13:20
  So we'd have access to the teeth. So there was like a, like about a half a year where we had a
• 2:13:25
  bunch of like frozen pig heads in the freezer of our office and we were like using that to do
• 2:13:31
  testing. We'd like die the teeth and then use the machine and see like how well it would remove
• 2:13:37
  the die. And so we had to do a lot of testing on that. We had to really experiment with like the
• 2:13:43
  spacing of the device of like how close to the teeth it needs to be. We had to experiment with
• 2:13:49
  the shape of the channels that the water goes through so that the water droplets hit your gum line
• 2:13:54
  at a specific like like with enough pointiness because if it's too broad, it's not doesn't have
• 2:13:58
  enough pressure. We had to experiment with how much water pressure, how much water volume,
• 2:14:04
  what electrical motors to end like the the assembly characteristics of how you put all these
• 2:14:12
  things together so they don't leak over time because you're using a lot of water pressure and
• 2:14:16
  vibrations. And so there was it was like a Rubik's cube that every time you fix one thing,
• 2:14:20
  you break another and that's why it took us a very long time to actually
• 2:14:25
  and then and then this is mass market. So different kind of take to market strategy. So
• 2:14:31
  people kind of treat their teeth the same way and they have been treating them for for years and
• 2:14:36
  years and years and and behavior modification in business is very difficult because I've tried
• 2:14:41
  to build things that have not been successful due to behavior modification. So how do you
• 2:14:46
  have to learn creatures of how it is very much so very very much so so how do you like how do you
• 2:14:51
  make this is it success? Yeah. Oh yeah. It is. Let's go. Yeah. How do you make it how do you make
• 2:14:55
  it successful? How do you do well? We did actually we did a crowdfunding campaign for this too.
• 2:15:00
  Why do you do that for your businesses now? It is supposed to just well because we we uh we needed
• 2:15:05
  the money. But I mean you have one business. You didn't want to like blur the lines and
• 2:15:10
  so fund the so well first of all is developing new products for that business is it which takes a lot
• 2:15:16
  of money. So I while we were developing InstaFloss we were also developing the Aeros looper
• 2:15:22
  and which is was our by far most sophisticated product that we've ever made and it took quite a
• 2:15:27
  few years to make it and took a lot of engineering money and then once because it's a hardware
• 2:15:32
  business you have to make the molds and you have to make the the first production run and that
• 2:15:36
  all takes a lot of upfront money before you can start selling it and actually pull money and so
• 2:15:42
  that's why we did a crowdfunding campaign. But we it went very well we raised about a million
• 2:15:47
  dollars on Kickstarter with the with the InstaFloss crowdfunding campaign and and we just started
• 2:15:55
  delivering InstaFloss actually just a few months ago to our first uh to our first customers and uh
• 2:16:01
  and we've already gotten people writing us back my dentist says he can't believe how good my
• 2:16:06
  gums are you know so it's amazing yeah yeah and when you think about like first of all it's
• 2:16:10
  a fabulous product I didn't realize it was so recent yeah um but I've been working on it for a long time
• 2:16:15
  yeah I know but it just hit the market recently so this is not like you're not you're not paying me
• 2:16:18
  to say this but I I'm gonna get I'm gonna get this so if I can go buy it tell me what it work in
• 2:16:23
  you get it at InstaFloss.com okay cool like like Instagram of flossing I love the floss.com when you
• 2:16:27
  think about marketing or taking to market these products outside of Kickstarter which is going to
• 2:16:31
  lead to like your first customer base and word amount um for products like this do you think we're
• 2:16:36
  gonna go to the Wal-Mart's and the Costco's of the world probably not right away we don't have
• 2:16:41
  revenue yet you go through distributors we go through uh channel partners we go through uh dentist
• 2:16:47
  we could go through influencers like there's a million different ways to market a company when you're
• 2:16:51
  hot when you have a mass market product where do you go first so our strategy is we're going
• 2:16:56
  direct to consumer first which is we did through the crowdfunding campaign and we're also selling it
• 2:17:00
  direct through to consumer through our website and the reason we do that well first of all you have
• 2:17:05
  the highest margins right because you don't have to give Wal-Mart a cut and the distributors a cut
• 2:17:08
  and all that uh shipping costs we have shipping costs yes but you still Wal-Mart takes like half
• 2:17:14
  of your money you know so it's the shipping cost there's a small amount of that um it is storage
• 2:17:20
  costs you still make way more money if you sell it directly it all depends on how much a cost
• 2:17:23
  you to market that of course you know you can spend unlimited amounts of money on marketing
• 2:17:28
  so all your profit margin could go into marketing but um but another reason we wanted to do direct
• 2:17:34
  to consumer first is in case there were any issues with the product we would have that direct
• 2:17:39
  line of communication people say hey my product is not functional in this way or I have this problem
• 2:17:45
  I wish it did this different and we've had a few of those issues um there's always manufacturing
• 2:17:51
  issues in the beginning and so we've had to fix a few of those and that's why we're glad because
• 2:17:55
  Wal-Mart would have just sent the entire shipment back and you burned our relationship and you burned
• 2:17:59
  the relationship so we wanted to really dial it in and make sure that we we had you know the entire
• 2:18:06
  product perfect before we start scaling up and so we're actually currently right now in the stage
• 2:18:12
  where we've finally nailed down all the manufacturing issues and um we're ready to start scaling up
• 2:18:20
  so yeah we're actually in the middle of raising a fundraising round your direct consumer
• 2:18:25
  uh from what I've heard from people that have launched consumer brands and direct
• 2:18:29
  consumer brands um the traditional way that you'd sell direct to consumer because you don't have
• 2:18:33
  a channel like amazon that's distributing it for you don't have organic reach per se so
• 2:18:38
  aside of jumping on podcasts you rely a lot on ads right and ads in 2024 post iOS update
• 2:18:46
  it's very hard to get positive row ads on ads for cheaper products so how do accept if they have a
• 2:18:52
  high lifetime value or there's a there's a subscription product or something like that so how do you
• 2:18:57
  make it profitable how do you make a product like that it's kind of like a one-time sale or is it
• 2:19:01
  I don't know so we do have uh we do have a recurring revenue for it because you do as with all
• 2:19:07
  dental products like your toothbrush you do need to replace the head that's the part that looks
• 2:19:12
  well built so how it is you replace so you're so the recommended uh uh replacement rate by dentist
• 2:19:18
  for any oral hygiene product is every three months you're supposed to change your toothbrush every
• 2:19:23
  three months not everyone does it but you're supposed to change it every three months because
• 2:19:27
  eventually like bacteria builds up and it can clog things and plaque and and things and and like
• 2:19:32
  this has like little channels the water goes through and uh things can build up inside over time
• 2:19:37
  minerals and so which can uh interrupt the water flow so I mean this is a it's not expensive it's
• 2:19:44
  like you know like $10 for replacement head but if you're replacing it four times a year that's
• 2:19:50
  you know $40 of recurring revenue per user per year uh we're also uh planning on launching a
• 2:19:57
  which we haven't done yet uh we're planning on launching a um concentrated mouthwash that you
• 2:20:02
  could add to the uh to the reservoir so that you could have like mouthwash at the same time as you
• 2:20:07
  floss your teeth so that's an additional uh uh recurring revenue so you have that recurring
• 2:20:12
  right for the model yeah and and we also have a few other hygiene related products that um in the
• 2:20:18
  pipeline that I'm not ready to talk about yet but are in the same um in the same uh uh field so that
• 2:20:25
  we can use our mailing list and use all our previous uh customers as an additional cross-sale
• 2:20:31
  and and and can you get positive row-as when you when you're running ads what's oh yeah yeah yeah
• 2:20:36
  yeah it's it's very profitable what is it you know especially with all the other uh aspects of it
• 2:20:40
  very smart and I think that's I mean like you you can you've nailed it like a lot of people that
• 2:20:44
  are just selling consumer goods products or whatnot and they focus on the one-time sale that's
• 2:20:48
  where it's hard to be profitable what you have that recurring revenue stream all of a sudden
• 2:20:51
  in terms of it makes it makes it much more profitable yeah uh yeah and then the head is the biggest
• 2:20:56
  profit margin so many a thousand percent yeah yeah so so there's uh there's a there's a quite a
• 2:21:00
  lot of recurring revenue from that how do you manage uh well not we'll talk about the third
• 2:21:05
  business you have how do you manage multiple businesses and and for example why would you not
• 2:21:10
  try and exit uh singular sound before raising uh what was the name of the actual sorry I have it
• 2:21:17
  that's my bad so it's it's insta floss or excuse me why would you not exit singular sound before
• 2:21:22
  you raise for insta floss well I I was running uh I am running singular sound on the CEO of singular
• 2:21:27
  sound and when we came up with the idea for uh and I have multiple projects going with singular sound
• 2:21:33
  multiple um products that we're developing uh so it's not like it's just coasting
• 2:21:39
  we're we're constantly developing I have a development team that's working on new projects and new
• 2:21:44
  products um with uh with insta floss the idea was because my brother uh he he's not a musician
• 2:21:52
  but he wanted to uh get into something more mass market so he became the CEO of insta floss and
• 2:21:58
  so he is he's taking the lead on that uh and of course you know we both help each other out with
• 2:22:03
  both businesses because we're both co-owners but um but that's how we we're doing it he's the CEO
• 2:22:09
  of insta floss and that makes sense and I think that that's actually I mean I think there's so much
• 2:22:15
  it's such a super power to be able to build business with family because you solve for the trust
• 2:22:19
  factor immediately and that is if you've never built a business that is like so underrated yeah
• 2:22:25
  absolutely I mean as I learned the word way oh because like it doesn't even man not even business
• 2:22:30
  partners it could be it's not even like let's make the assumption that most business partners
• 2:22:35
  don't want to fuck you over even though they do but let's make the assumption that they're still
• 2:22:39
  good people it's like you're human and you'll always have reservations about being super candid with
• 2:22:46
  people that are not your own family and you cannot just explicitly trust them and and those two
• 2:22:51
  factors like that radical candor and and being able to trust that person with your life
• 2:22:57
  I mean it's like you just like hacked business because those two things kill more businesses
• 2:23:02
  than anything else um yeah I feel very fortunate yeah my great relationship with all my siblings
• 2:23:08
  after this whole life of of all these ups and downs and everything with even like the work you
• 2:23:14
  went into how did that affect the relationship with your family uh well I so as I said I have eight
• 2:23:21
  siblings there's yeah I have us all together I've been including the parents in that too yeah yeah
• 2:23:25
  so my parents um when when we first started like when we first won the contract or three hundred
• 2:23:31
  million dollar contract my parents were super proud of me right they're like oh he's gonna be
• 2:23:34
  successful you know and then of course when the New York Times published their article they were
• 2:23:40
  a little less proud um my dad actually called me up and he's like oh I have a lot of my friends
• 2:23:46
  are calling me up asking me if I'm related to and I said yeah he's my son and they're like oh we're
• 2:23:53
  so sorry and so he my dad was somewhat well-known in the Jewish community uh so he he and we have a
• 2:24:01
  very uncommon last name I've never met anyone with my last name that would not it's not like a
• 2:24:07
  normal Jewish last time it uh it pack out is a Latvia name actually originally Latvian
• 2:24:13
  but my ancestors from like a hundred years ago came from like Latvia and Poland and Russia and
• 2:24:19
  my family's been in the United States about a hundred years but uh but yeah our name is very
• 2:24:24
  uncommon so when people saw it in the in the New York Times they're like he must be related to
• 2:24:29
  rabbi common pacos you know so and so he started getting calls from from his friends all over the
• 2:24:35
  world wishing him condolences and uh so yeah so that did not go well but uh but then when you know
• 2:24:43
  like I launched the beat buddy you know that that was kind of like my redemption you know I was
• 2:24:48
  like I could show I could build a legitimate business yeah that you know my dad could be proud of
• 2:24:54
  and so that was that was really nice and and when the movie came out my dad loved it
• 2:25:00
  because all his friends thought it was super cool that you know that his you know there's a movie
• 2:25:04
  about his son and uh my mom refused to watch it still she still not what hasn't seen it she
• 2:25:10
  what she told me was I don't need Hollywood to tell me about my son oh my goodness that sounds
• 2:25:15
  like a that sounds like a mom it sounds like actually exactly exactly uh my dad loved the movie except
• 2:25:22
  for one part which I thought was hilarious uh he got there's this one part in the movie where um
• 2:25:28
  when when Miles Teller and Jonah Hill like meet for the first time like in in the funeral
• 2:25:32
  which is not how we we actually met at Alex's house smoking weed but but in them you know they
• 2:25:37
  wanted to make it look cooler so they had to meet at the funeral um and so uh they uh there's
• 2:25:44
  there's this one line where like Jonah Hill tells Miles he's like I was tried to get uh you know
• 2:25:48
  I didn't have your number I tried to get it from your mom but she wouldn't give me your number
• 2:25:52
  and Miles Teller goes what you you're talking to my mom and Jonah goes yeah man I was fucking her
• 2:25:58
  huh you know I can see why do that with like that line my dad just means like the what he said
• 2:26:04
  about your mother it's just it wasn't funny there's like out of the why he think thought it was
• 2:26:09
  that orthodox who was grabbed by that's uh yes okay so I get it so that was the one part of the
• 2:26:15
  movie he didn't like everything else he thought was great you know he loved the movie but he didn't
• 2:26:19
  he didn't like that part so after all of this after all this like I mean now you've like rebuilt
• 2:26:23
  that relationship yeah you read that's beautiful that's that's beautiful I think that's right I
• 2:26:27
  get very important I mean like what's the point of building anything if you don't if you don't have
• 2:26:31
  family around um so you've so now your brother manages and and as CEO Vince the floss you CEO
• 2:26:39
  singular sound you shared resources does other family involved or no so yeah we have uh three
• 2:26:46
  other brothers who work in our company between the two companies yeah yeah so after these two
• 2:26:52
  companies singular sounds been around for 10 years now it's doing very well it's it's are you
• 2:26:58
  eventually going to sell or are you I'm considering it sometime in the future uh you know
• 2:27:03
  you don't when you when you go you don't build to sell no I I mean like look if someone gives me
• 2:27:08
  a really good offer I'll take it you know I'm not I'm not like emotionally you're not seeing
• 2:27:13
  a private equity or strategic buyer not yet definitely not yet I've got a few other you know
• 2:27:18
  grand slam products that I'm waiting to come out with first so to get that valuation up
• 2:27:23
  uh so yeah I'm not like actively seeking but if someone came to me now and offered me uh
• 2:27:27
  I've got a number but you know but if someone gave me that number I'd take it um but uh but yeah
• 2:27:33
  I'm not like in a rush to sell singular sound I actually really love working you know this business
• 2:27:38
  well the reason why yeah the reason why I think the first thing I said in this interview was like you
• 2:27:41
  don't seem like an entrepreneur that would have gone into like arms dealing right because you
• 2:27:46
  really do seem like a very creative entrepreneur that has a business mind but you do love like
• 2:27:51
  creative endeavors that's my favorite thing is to create new things and to yeah because the the
• 2:27:56
  arms business uh for all this glamour right is really just logistics that's really all it is you
• 2:28:01
  buy from one place yeah move it to another is no you know there's no creativity there I mean
• 2:28:06
  you can get creative but that's where you get in trouble right so uh and and government contracting
• 2:28:13
  is the same you know people think government contracting and arms are the same thing it's not
• 2:28:17
  government contracting is a enormous field it covers every industry um and as I said like my
• 2:28:23
  first contract was for fuel it was for propane and I worked on contracts for food and for clothing
• 2:28:29
  and cars and and I did all sorts of stuff uh we just happened to specialize in the arms business
• 2:28:34
  and that's kind of now people associate government contracting with the arms business but overall
• 2:28:39
  the government contracting field is a logistics field right you're you find the best possible
• 2:28:44
  price you find the best possible logistics you bid on a contract you win it you deliver you collect
• 2:28:48
  the money and there's nothing wrong with that and there's an enormous amount of business I just
• 2:28:53
  personally enjoy a more creative aspect of the bit I like the blue ocean businesses you know
• 2:28:59
  so like I like creating products that don't exist I just enjoy that more um so uh yeah I mean
• 2:29:07
  that's that's why I got into you know singular sound and it's the floss and I have I have like a
• 2:29:11
  spreadsheet of like 30 different ideas I have no doubt you do I have no doubt you do is there is
• 2:29:15
  there anything any any lessons any like business or entrepreneurial lesson that you did take
• 2:29:20
  from arm's dealing that have helped you in in seflosses and gular sound well I would say not
• 2:29:26
  necessarily from arms dealing as a as an industry but from from my experience doing that is and
• 2:29:34
  it's going to be super cliche but like I definitely learned the value of the grind and hard work
• 2:29:41
  and I think a big source of why of why we were successful was that we outworked everybody else
• 2:29:48
  like we were we were really working our asses off like you know it's not in the movie they kind
• 2:29:53
  of make it all glamorous and you get the montage right but you don't actually spend 18 hours you
• 2:29:58
  know sending emails and going down like like Google results and going through directories and
• 2:30:04
  calling people up and following up and it's a it's a grind you know it's a grind and you have to
• 2:30:10
  accept that if you want to be successful in that business it's it's it's a grind so I would say
• 2:30:15
  work ethic yeah I'll talk a lot of shit about Ephraim right but one thing I admire about him is
• 2:30:21
  that he has incredible work ethic right he works is and I would say too much to be honest like I
• 2:30:26
  think it he works to an unhealthy level I think everyone needs to find the the balance right where
• 2:30:34
  you can work your you know to what's necessary the level that you need to work to be successful
• 2:30:39
  but so that you don't burn yourself out because if you burn yourself out you're not going to be
• 2:30:42
  successful over the long term you need to find the maximum amount of work you can do on a regular
• 2:30:46
  basis and that's different for everybody and Ephraim had a had a incredible work ethic
• 2:30:52
  um he did go in like kind of spurts and like he'd work his ass off for like you know like a
• 2:30:58
  week and then pass out for three days and like be no unreachable and extremely unhealthy and from
• 2:31:04
  people I know who still know him he's still doing that so it's extremely unhealthy and I don't
• 2:31:10
  think it's it's not a good long-term strategy like on a personal level for anybody um but he you
• 2:31:16
  know one thing I always admired about him was that he could work his ass off and he was willing to
• 2:31:20
  work harder than pretty much anyone else to to an unhealthy level and and that's so like I learned
• 2:31:25
  that's a good thing but there's definitely a limitation to that and you need to be able to
• 2:31:30
  have balance in your life and have take care of other aspects of your life you are not your work
• 2:31:34
  right you there are more things that go into making a human than just making money all day and
• 2:31:40
  that's very important but if you don't address the other aspects of your life it's going to affect
• 2:31:45
  your business too it's only a matter of time it's only a matter of time so that's so that's a big
• 2:31:50
  lesson that I learned is that you have to work at your ass off there's no such thing as an ease
• 2:31:55
  as easy money you know everyone wants to get rich quick get rich easy almost never happens right
• 2:32:02
  it could happen I'm not saying there are people who get lucky all the time but like in the vast
• 2:32:06
  majority of the cases it's going to be a slog and it's going to take you way longer than you thought
• 2:32:10
  right that's just how it is every product I've developed has taken the about on average three times
• 2:32:16
  longer than I thought it would and probably three times as much money yes and yes that's not
• 2:32:22
  just not just time not just time energy and he's already exactly exactly you have no more hair
• 2:32:26
  oh I do you know I used to have beautiful hair all that stress so yeah I would say that's the
• 2:32:32
  biggest the biggest lesson I took away from that is is having to work hard and yet balance it
• 2:32:40
  because as I said I learned a lot of things to do from f-room which is you have to work hard but
• 2:32:43
  also what not to do is to be completely obsessed and have nothing else going on in your life except
• 2:32:47
  for that and you know as well as other things that you shouldn't do a lot of other a lot of other
• 2:32:52
  things that you should do yeah one thing that I'm a huge fan of this this this concept that I'm a
• 2:32:58
  huge fan of is seasons of your life and understanding which season of your life that you're in
• 2:33:02
  because I do believe that for somebody to have a large financial success or entrepreneurial success
• 2:33:07
  there'll be a season of your life where a portion of it maybe is working like that for him and
• 2:33:12
  is working and and yourself too like not just him and you're just kind of like balls of the wall
• 2:33:17
  you're putting everything into this thing that you're trying to build but then you have to
• 2:33:21
  understand okay so maybe that's before I have kids or a wife or a family and then I do have kids
• 2:33:26
  and a wife and a family and if you carry that season into that next season that's when you're
• 2:33:32
  going to be yeah it can be a lot of problems and it's and you could ruin your life like that
• 2:33:37
  so I don't like the term like work life balance I do like work life integration but I also think
• 2:33:42
  that depending on the season of life that you're in the scale should tip one way or the other
• 2:33:46
  and I think that's a very healthy way to look at entrepreneurship and when you're looking at your
• 2:33:50
  life and you're like you're stressed about when you were getting when you were getting like charged
• 2:33:57
  and sentenced you're not stressed about oh I'm not going to be of course it's underline I'm not
• 2:34:02
  going to be able to make money while I'm in jail but ultimately it's like I have a family
• 2:34:07
  and I think that's a beautiful thing and it takes the focus away from you the focus on the family
• 2:34:11
  then that was like one of the biggest realizations I had when I was looking at decades in prison
• 2:34:17
  it's like I might miss watching my kid grow up you know I've got like a little baby and like I
• 2:34:22
  when I come out she could be an adult you know and not only will I miss out on my whole life but
• 2:34:27
  I'll miss out on my kids life and and there's really there's really nothing that's worth that
• 2:34:32
  you know like you can make more money you can never make more time that's just how it is
• 2:34:37
  I think if people spend as much time figuring how to make money as they do trying to do shit
• 2:34:43
  the wrong way I think they'd be very successful I mean if that from just focused on doing
• 2:34:48
  like even like your your situation is like a very specific situation but if you put that much
• 2:34:53
  energy and effort into almost any business anything yeah you're gonna be you're gonna be pretty
• 2:34:57
  well off you know he could just tweak a few things about his strategy by if he just didn't
• 2:35:03
  fuck over every single person he came in contact with I think he would be way more successful you know
• 2:35:07
  that I've heard I've heard listen I have a lot of friends now in Miami and I've and I have a lot
• 2:35:12
  of friends that have made quite a bit of money just through through interviewing them become friends
• 2:35:17
  with them people that have had massive exits and his reputation is not good in the city yeah from
• 2:35:22
  other people way before I met you it's very interesting because I mean I've I don't care I don't
• 2:35:27
  know the guy at all but it does your ration proceeded it really does it really do yeah yeah yeah
• 2:35:34
  it's it's absolutely wild and you have to be careful the world is very small yeah absolutely
• 2:35:39
  the world is very very I'll give you one one little antidote that just really encapsulates his
• 2:35:45
  problem I would say um I did another podcast called uh inside true crime and it's with I'm not
• 2:35:54
  you Matt Cox yeah yeah yeah yeah yeah yeah yeah Matt Cox Matt Cox was in prison with Ephraim
• 2:35:59
  he met Ephraim in prison oh yeah Matt Cox wrote Ephraim's memoir he was his ghost writer now
• 2:36:06
  it half of his memoirs literally a work of fiction actually he oh there's a whole story behind
• 2:36:11
  Ephraim's memoir it's called once a gun runner from the line he used when he got arrested but um
• 2:36:18
  there's a uh it's it's a semi entertaining book extremely self aggrandizing and
• 2:36:24
  and ecotistical uh one of the first lines in the book he's like he describes himself because he's
• 2:36:29
  like supposedly the author of the book right he's Ephraim Diverouli who was handsome by anyone's
• 2:36:34
  standards you know like he got there's like unbelievable line in the book it's a line in the book
• 2:36:39
  he also he also claims that all the prostitutes he slept with ended up falling in love with him
• 2:36:43
  and refused his money and you know it's completely unbelievable and ridiculous yeah I know
• 2:36:48
  it's it's hilarious um so uh and and also Matt uh combined Ephraim was using that book as a way
• 2:36:56
  to sue Warner Brothers for like stealing his story so he was trying to get his book out before the
• 2:37:02
  movie was published and Matt didn't have enough time to finish the book so uh Ephraim Matt was in
• 2:37:08
  jail yeah yeah Matt was oh Jenny was out uh you know yeah Matt eventually got out yeah but no
• 2:37:12
  knowing while he was writing like oh how can you publish a book so he was he was using I think
• 2:37:18
  the jail had like a computer like time or something and he he had to like it was a big pain in the
• 2:37:23
  butt obviously to get it out but he managed to write uh the book in jail but he didn't have enough
• 2:37:28
  time to finish the book the right way so uh Ephraim who wanted to get the book out uh before the movie
• 2:37:34
  came out he said oh just you know like take one of your other unpublished works of fiction and
• 2:37:39
  combine it with this to it haven't so he took like literally a novel he wrote yeah that was
• 2:37:45
  completely fictional and just changed some of the names and combined it into Ephraim's memoir this
• 2:37:51
  is what Matt told me and um so like literally Ephraim's memoir is a good like is literally a work
• 2:37:58
  of fiction and even the parts that were based on true story are like that I that I know of like he
• 2:38:04
  changed things around completely to make himself win win that box was like whatever I don't care
• 2:38:09
  I'll publish it anyway yeah so he didn't want to but like he but Ephraim insisted and so uh so yeah
• 2:38:16
  so anyway so while he was while Matt was writing this is the the part that I want to tell you about
• 2:38:21
  well Matt was writing Ephraim's memoir yeah and Ephraim was telling him all the stories he's like oh
• 2:38:27
  and then I screwed this guy in this way and then he was very proud of all these you know like ways
• 2:38:31
  he pulled you know he screwed all these people out he's yeah he thought it made him look smart you
• 2:38:36
  know like he's I outwitted this guy in this way and then I screwed over that guy in that
• 2:38:40
  yeah and and so Matt told after like the like the seventh eighth story I in this similar fashion
• 2:38:46
  you know uh Matt looks at Ephraim and he's like you know Ephraim you can't really just
• 2:38:51
  keep on like burning all your bridges man and Ephraim looked at him and he says Matt
• 2:38:58
  there's a lot of bridges out there and Matt told me he's like and that's the moment I knew
• 2:39:05
  he was going to screw me over too and he did he did he screwed Matt out of every penny he promised
• 2:39:11
  him for writing his book of a course he did he just can't he can't stop he can't stop even
• 2:39:16
  hit small he can't stop it doesn't matter how small the money is but that's that is to your point
• 2:39:21
  like that's like a sociopathic thing yeah yeah it's not like he's it's not like this is like he
• 2:39:27
  he was consciously doing it but that's not a normal way to react no no he's not a normal person
• 2:39:31
  I mean you know so yeah so yeah I mean that's I think that kind of encapsulates his problem like
• 2:39:38
  if he didn't have to burn every bridge he would be way more successful because people would
• 2:39:42
  keep on doing business he probably is smart and does have work as a smart he does he does that you
• 2:39:47
  know like and he doesn't go on interviews or no he doesn't want to because I mean I assume because
• 2:39:52
  he doesn't want people recognizing him in public you know uh and he also keeps where he lives
• 2:39:57
  a secret because a lot of people try to sue him and he tries to avoid getting served and all that
• 2:40:02
  stuff there's not a good way to live now yeah I always looking over your show are you ever worried
• 2:40:05
  that I mean you speak about him very much shit about him all day yeah yeah I'm not worried I'm
• 2:40:09
  not scared of him you don't think I'm gonna sue you sue me was he gonna sue me over you know saying
• 2:40:14
  the truth yeah that's better than not worried about it I'm not worried about it um I mean he could
• 2:40:19
  sue me he's he's a he's the king of frivolous lawsuits that's what I was what yeah and and you
• 2:40:23
  don't want to be hide up in that because you know I don't but I'm not gonna prevent myself from
• 2:40:27
  telling the truth over that either you know I'm not scared of him you know I mean look if he
• 2:40:32
  sues me I'll count or sue him you know maybe I'll actually get some money out of him finally you know
• 2:40:37
  whatever you know like I'm not luckily I'm in a good position in life now and I'm not like
• 2:40:41
  completely defenseless like I was back then you know I'm not gonna I'm not gonna be desperate you
• 2:40:46
  know or anything to get rid of him you know if he wants to sue me I'll sue him right back you know
• 2:40:50
  so fuck him you know I don't care I don't care um but I'm definitely not gonna hold myself back
• 2:40:55
  from saying the truth and telling the story and everything like that I didn't know so I didn't
• 2:41:00
  know all these parts of the story this is absolutely phenomenal in the worst way possible like
• 2:41:05
  I got a fuck off to say yeah yeah Jonah Hill is uh Jonah held that him yeah I think he did him a
• 2:41:12
  service yeah I think he made him a lot more likable did you ever ask him like like why he screwed
• 2:41:16
  you over so Matt asked him Matt asked Matt asked Matt Cox asked Ephraim why did you screw over
• 2:41:22
  packhouse and Ephraim told him he said Matt told me this you know while I was on his podcast and he
• 2:41:29
  said you know Ephraim told me he's like you know at first I thought that the deal I made with
• 2:41:33
  packhouse was a good deal because you know if we don't make any money then he doesn't get anything
• 2:41:37
  no risk on my end and if we make money yeah he gets a commission but like you know he uh but like
• 2:41:43
  he only gets that if we're actually making money so it's only in that positive but after we won
• 2:41:48
  the contract I realized man I'm gonna have to pay millions of dollars to packhouse and I could hire
• 2:41:53
  someone else to do this for less than a hundred K a year so why should I pay packhouse millions of
• 2:41:58
  dollars when I could have someone not a vision screw someone well in his mind it was so pretty much
• 2:42:04
  the reason the reason was he didn't want to pay me that's the reason that's the reason there's
• 2:42:08
  that there was no bad blood no he didn't think you did anything right no he's just like well I have
• 2:42:14
  two options yeah pay him or not and I rather go with the not pay off make more money if I don't
• 2:42:20
  pay him that that was his reason yeah I'll never be successful no I'll never be successful no
• 2:42:25
  no that's insane he'll never build anything long term I'm sure he can screw people and he has
• 2:42:30
  screwed people over you know uh on deals and made money in the short term but he's never gonna
• 2:42:34
  build a long-term business because to do that you need to actually build partnerships that work
• 2:42:39
  for more than just yourself yeah who cares about who cares about four million dollars yeah
• 2:42:46
  when you have the up and you're winning three hundred million dollar contracts yeah and we could
• 2:42:50
  like one more contract right there excitedness is phenomenal yeah absolutely phenomenal yeah
• 2:42:56
  anyways yeah yeah yeah it's a no it blows my mind too it doesn't make any sense when you like
• 2:43:01
  what like hearing it yeah I'm like like you had a great business absolutely outside of the fact
• 2:43:07
  that and and I would be fucking furious if I got got for a bit get sent to jail and and lost
• 2:43:15
  tens of million hundred and millions of dollars over 20 grand yeah I'm mad for you yeah oh I was
• 2:43:22
  pretty mad myself uh yeah it's it was just unbelievable uh I would have paid the guy myself
• 2:43:28
  the 20 grand but I'm about to pay this guy 20 yeah yeah I was I was actually seriously considering
• 2:43:34
  it at the time but like at the time I was down to like my last 30 grand and I was like I'm not gonna
• 2:43:38
  give it a guy you know out of my pocket you know like almost all the money I have left uh so yeah
• 2:43:44
  in retrospect maybe I should have but then again he wouldn't have paid me anyway so you know I
• 2:43:48
  would have had to chase him and and yeah it was it was not a good thing that's too bad that's very
• 2:43:53
  yeah that's it's a it was a great movie but in real life it's like kind of a sad yeah yeah
• 2:43:59
  but you know I am personally very grateful for where I am now you know like you wouldn't change
• 2:44:04
  anything I wouldn't change anything because you don't know you can't maybe test the universe
• 2:44:08
  isn't they say you know like you can't like yeah if we had done something if we had paid the box guy
• 2:44:13
  right we would maybe it would have gone on maybe the at that point you would have tried to screw
• 2:44:17
  the mafia over directly and maybe we would have been ended up dead in mysterious circumstances
• 2:44:21
  it could have happened very easily it could have happened he was so close to doing that you know
• 2:44:25
  while he was in Albania he tried to but then you know like they they weren't happy to
• 2:44:29
  they they they they they they saw right through him he tried to show them fake documents and
• 2:44:33
  yeah yeah he doctored a whole bunch of quotes and he's like you have to give me a better price
• 2:44:37
  because these guys are gonna they're like yeah those documents are fake don't show me those fake
• 2:44:40
  documents you know they the mob you know and so yeah I mean he uh who knows what would have happened
• 2:44:48
  I'm very happy with where I am today I'm working with my family members you know I've I um
• 2:44:54
  I'm building businesses I'm proud of actually creating products that people really
• 2:44:58
  really love you bring them to the value yeah that I believe there's nothing wrong with nothing
• 2:45:03
  wrong with with brokering businesses you are bringing value by providing a service for less money
• 2:45:08
  but it's just for me it's fulfilling and and it's one of the most we haven't talked about it much
• 2:45:14
  what I want to talk yeah yeah so so my latest business uh which literally just started a few months
• 2:45:19
  ago um and I'll tell you how this this uh came about ever since the movie came out I've had a lot of
• 2:45:27
  people contact me on social media pretty much begging me to teach them how to do government contracting
• 2:45:33
  and uh I was banned from doing it for like 15 years there's still banned no I just got off
• 2:45:38
  I'll just like literally last year um and but I was I hadn't done it in like 15 years and of course
• 2:45:45
  you know I figured they probably maybe they changed some of the rules you know some of the procedures
• 2:45:49
  and so like I wasn't gonna like teach people how to do this I figured my knowledge was a bit out
• 2:45:54
  of date um and anyway I was busy building singular sound an insta floss and so it's not like I had
• 2:46:02
  time to teach people this stuff anyway so I um but then about like a year ago I had a uh this
• 2:46:09
  guy named Logan he contacted me out of the blue I think was on Instagram and he told me send me a
• 2:46:14
  message he's like hey just want you to know that about six years ago my partner James and I we were
• 2:46:20
  21 years old and we were dead broke working on a farm in Australia picking bananas you know
• 2:46:27
  just because they had run out of money after traveling in Thailand and they were gonna build
• 2:46:30
  save some money to continue traveling and they were they were picking bananas on a farm literally
• 2:46:36
  dead broke and the farm had a movie night and they showed war dogs and they thought to themselves
• 2:46:44
  man these guys are our age they're 21 22 if they could do it why can't we do it and so they got
• 2:46:49
  obsessed with it they learned how to do the business they bid on a whole bunch of things they
• 2:46:53
  managed to win like a small laundry services contract and then they won a bigger laundry services
• 2:46:59
  contract and a bigger one and then six years later they have a multimillion dollar business
• 2:47:04
  specializing in laundry services providing it to like a military bases all over the world
• 2:47:09
  they're flying to like Europe and taking care of contracts in Germany um and they they're very
• 2:47:15
  successful now and they just reached out to me to say thank you you know for the inspiration
• 2:47:19
  you know they're like without war dogs we would have never done this and so I thought
• 2:47:22
  these guys are currently have multimillion dollar contracts they're bidding on new contracts
• 2:47:27
  there is up to date as you can be about government contracting side told them like hey guys first
• 2:47:31
  of all I'm super inspired that you guys taught yourself the business not many people can do that it's
• 2:47:34
  not it's not a simple business it's complex it's not hard but it's complicated especially when
• 2:47:40
  you're learning from scratch um much easier when someone else is teaching you as I had with Frem
• 2:47:46
  and Frem had with his uncle so I said I was very impressed with these guys that they taught
• 2:47:51
  themselves the business and so I said why don't we everyone's I've literally hundreds if not
• 2:47:56
  more than a thousand people in my DMs asking me to teach them this why don't we start a course
• 2:48:02
  to teach people how to do this and so that's how we launched war dogs academy it's an online course
• 2:48:07
  step-by-step guide video formats as well as written you know we have like a textbook that goes with
• 2:48:13
  it but you could do everything in video and uh and we also have a community like a forum where all
• 2:48:20
  the students can uh make business connections with each other and we have and interact with us
• 2:48:26
  with the founders and ask us questions every week we have uh twice a week live question and answer
• 2:48:31
  sessions so anyone who has any questions they can ask questions and get and listen to other people's
• 2:48:37
  questions and learn that way and we hired I think one of the one of the biggest value ads for
• 2:48:42
  the community is we hired a couple of um retired contracting officers people who used to work for
• 2:48:48
  the government deciding who wins the contracts now they work for us and they they coach our students
• 2:48:55
  they review their proposals before they submit it to the government to make sure they're not missing
• 2:48:58
  anything they answer any questions they don't understand and because of that actually just in the
• 2:49:03
  last few months we've had over 50 students win their first federal contracts that's amazing some
• 2:49:08
  of them in the hundreds of thousands of them and these are this is like pure like starting to build
• 2:49:12
  the business from scratch yeah crash and uh uh a thing that we're really excited about we also
• 2:49:19
  made a deal with the financing company to finance our students federal contracts so one of the big
• 2:49:24
  limitations in government contracting is that the government pays you 30 days later after you
• 2:49:29
  deliver which means you need to float that that uh financing if you're buying from the you know
• 2:49:34
  most suppliers will require you to pay up front before they ship and then you have to pay the
• 2:49:38
  logistics company to ship it and then you have to wait 30 days after you've got a big cash flow
• 2:49:43
  issue and most entrepreneurs who are just starting out don't have that money and so but the good
• 2:49:48
  thing from an investor's point of view is that federal contracts are as as uh safe as it comes right
• 2:49:56
  because the government is not going to run out of money they print the money and they and they're
• 2:50:00
  not going to screw you because they're not going the contracting officer isn't going to make a penny
• 2:50:05
  more if he screws you out of the money right no and you know he pays it's guaranteed against the
• 2:50:08
  exact orders exactly yeah guaranteed so as long as you deliver what the contract tells you to
• 2:50:13
  deliver you're 100 percent gonna get paid unlike in the private sector we have these nefarious
• 2:50:18
  actors who will try to screw you over and make more money and you know you have to sue them you
• 2:50:22
  know and all that stuff so so uh we made a deal with the financing company to to finance our
• 2:50:29
  students contracts and we get a little percentage of that you know so we have a the good business
• 2:50:33
  it's a great business and so we are uh we're very motivated to make sure our students succeed
• 2:50:38
  because the more money they make the more money we're gonna make and so it's uh it's uh it's really
• 2:50:43
  really gratifying you know that now when people contact me on social media they're like please
• 2:50:48
  teach me how to do the business I can actually teach them that is all you need to do exactly as
• 2:50:52
  well this is this is this is this is government contract procurement like in a box exactly
• 2:50:57
  it's turnkey solution what is like the biggest thing the people screw up they're trying to get
• 2:51:01
  into this business um I think that one of the biggest things is that they don't read the solicitations
• 2:51:07
  closely because the solicitations are long right this is what the government post exactly exactly
• 2:51:14
  yeah so when the government wants to buy something they are acquired by law to post it on their
• 2:51:19
  public website sam.gov right anyone can access it and look it up and uh they have the documents
• 2:51:26
  there and most of the documents are like 30 pages long right and they refer to a whole bunch of
• 2:51:30
  other rules that you have to go look up right and so it's kind of a slog to go through it so
• 2:51:36
  the the the the uh the tendency for people when they're just starting out is to kind of just like
• 2:51:44
  you know not read the whole thing or if they don't understand something kind of skip over it
• 2:51:49
  and that will you know oftentimes people make critical mistakes they won't supply a critical
• 2:51:54
  document that the government requires or they won't look at a particular rule and there's lots of
• 2:51:59
  rules for everything you know just to give you an example like when the government buys clothing
• 2:52:03
  they usually have a rule that a certain amount of the fabric needs to be grown uh in the united
• 2:52:08
  states and a certain amount of the assembly needs to be done certain percentages and you have to
• 2:52:12
  when you get quotes from your supplies you have to make sure they follow all those things
• 2:52:16
  when it's transported it has to be transported on you know if it's like between two American ports
• 2:52:20
  it needs to be on an American vessel you know it's like the Jones Act you know so there's a lot of
• 2:52:25
  of these rules that have built up over like a hundred years of government. You got to know them all
• 2:52:29
  yeah actually you got to know them all and that's why our uh our retired government contracting
• 2:52:35
  officers are such an incredible resource to our students because they know all this stuff
• 2:52:39
  and they'll like review our students' proposal and they'll be like oh you missed this thing or
• 2:52:43
  did you make sure to look up that they know the rules they know all the rules they've been doing
• 2:52:47
  it for like decades and so um and I think that's why so many of our students have won contracts so
• 2:52:53
  far is because they've had that support what would be the difference between uh starting this
• 2:52:59
  kind of business versus anything else that you started anything like like what who's the person
• 2:53:05
  that goes into government contracting as a business what are like the nuances for that kind of
• 2:53:09
  person so uh government contracting I think you're going to do well in government contracting if you
• 2:53:14
  can if you're willing to grind you know I always tell people government contracting is not a get
• 2:53:21
  rich quick scheme it's not a get rich easy scheme it is a get rich scheme right you could get rich
• 2:53:26
  and a lot of people do and we already have had students who are making hundreds of thousands of
• 2:53:30
  dollars you know in business uh uh that have gone through our program they started from zero right so
• 2:53:36
  they are already are well on their way to getting quite wealthy from this so it is very possible
• 2:53:41
  and it's doable but you have to be willing to uh to grind and you have to be willing to be
• 2:53:49
  meticulous in your details be very conscientious right that's one of the most important things
• 2:53:54
  and um and be willing to keep on going when you lose right because you're going to lose a whole
• 2:53:59
  bunch usually before you win we've had a few students who won the first contract they bid
• 2:54:04
  a quite a few I'm surprised you have the frame yeah yeah exactly but we have had a few students
• 2:54:10
  who went who submitted 15 bids lost them all and won the 16th and that 16th one made them so much
• 2:54:18
  money that they're like oh it just made all that other work that went for nothing worth it because
• 2:54:23
  we made so much money on this so it's you have to be willing to to uh deal with that kind of dynamic
• 2:54:30
  and that's not for everybody you know some a lot of people they want to put in their hours they want
• 2:54:34
  to get a great paycheck you know something solid that's not this business if you're going into
• 2:54:40
  this business you have to be willing to like not make any money for months at a time until you
• 2:54:45
  hit that big until you hit that big payday right you know my partner is actually uh they told me
• 2:54:51
  a story that they actually were doing really well for like the first year or two and then they hit
• 2:54:57
  like a dry spell of like six months where they did not win a single contract even though they submitted
• 2:55:02
  a lot of bids they didn't want a single contract and they're like oh my god maybe our run of good
• 2:55:06
  luck is over maybe we should get out of this business and then they won the biggest contract they'd
• 2:55:10
  ever won so you so it's it's a very like tumultuous it's a tumultuous business and you have to
• 2:55:16
  you have to make your peace with that and if you're okay with that kind of business and you're
• 2:55:20
  willing to do that kind of work then this is for you and you can make a lot of money doing it
• 2:55:25
  and the good thing about this business is that well first of all the complexity keeps a lot of
• 2:55:30
  competitors out right there's a lot of companies in the private sphere that don't want to deal with
• 2:55:35
  government contractor contracting you know that's why there's the room for the middleman right
• 2:55:41
  just actually surprisingly some large companies that don't want to even sell to the government
• 2:55:46
  because they don't want to deal with you know all the rules and all the paperwork and the financing
• 2:55:50
  and all well like even if you're a private company and you have resources like the resource you have
• 2:55:56
  you have access to are not like for example the officers that worked in the government like that
• 2:56:00
  like you got to go find out how to hire somebody make sure they're not full of shit and make
• 2:56:05
  sure they're good at what they do and then once you find that talent then you can and it's like
• 2:56:09
  almost like it's just like shiny objects syndrome you're just like like we're already everything
• 2:56:14
  over here is working we have a process over here what do we want to mess with that because it's
• 2:56:19
  a it's a whole lot it's like I think it's probably more of a mental hurdle than anything else but
• 2:56:24
  mental hurdles are real and the card they doesn't want to get into a stop people from doing yeah
• 2:56:28
  we're actually just started a B2B service more companies who have the resources and they just
• 2:56:33
  want to turn key solution so we have a we're just getting that off the ground we've actually had quite
• 2:56:38
  a few relatively mid sized to large companies contact us who they just want they don't want to
• 2:56:44
  like spend months training one of their employees to do this they're like just get us registered
• 2:56:49
  find out what we're eligible do the bidding for us you know fill out all the proposals
• 2:56:53
  yeah and and yeah so that's going to be a whole other element of war dogs academy now
• 2:56:57
  very very when for for for war dogs academy like I think that when people get into this kind of
• 2:57:06
  business they're always looking for maybe like a unique edge or a certain category that maybe more
• 2:57:15
  lucrative than others is there something is that is that the case are some things more lucrative
• 2:57:21
  than others like you should they be looking at munitions or laundry or food or medical or
• 2:57:28
  can make millions of dollars doing any of those things and and people have there's not one that
• 2:57:33
  stands out so I would say that I couldn't tell you that one particular industry is more is more
• 2:57:42
  lucrative or more has higher margins than another right because all it takes is one competitor to
• 2:57:47
  under bid you if I hit you know so I when when people one of the first the one of the most common
• 2:57:53
  questions we get is which what to specialize in right and I tell people if you already have a
• 2:57:59
  specialty like if you've worked in a particular field then try that first right like if you if you
• 2:58:05
  know the laundry business bit on laundry contracts if you know the food business bid on food contracts
• 2:58:11
  because you're already a leg up right you know some details of the business you may have
• 2:58:16
  connections for sources you know the the the potential hurdles like with logistics or or issue
• 2:58:23
  the rules that you may need to face every single industry has its own quirks right so if you don't
• 2:58:29
  if you have a specialty just start with that if you don't have a specialty just throw a lot of
• 2:58:35
  things at the wall and see what sticks that's what most people do you know they'll bow obviously
• 2:58:40
  you have to identify the things that you have a chance of winning and we do that in the course is
• 2:58:45
  to identify because not you're not you're not qualified to bid on everything as a beginner you need
• 2:58:50
  certain contracts you need a certain amount of past performance or certain licenses and
• 2:58:54
  and so we teach people how to identify contracts that they have a chance of winning and once you
• 2:59:00
  bid on a few of those if you bid on enough of them and stick through it and as I said some of our
• 2:59:05
  students had to bid on 16 contracts before they won one they won the 16th so you know I I admire
• 2:59:11
  them greatly for sticking it through because that's a lot of nose that's a lot of that ill-artisan
• 2:59:15
  you get through but required to learn it's required to learn and but if you're willing to do that you
• 2:59:22
  could succeed in any industry and we've had students succeed we had one student deliver ice baths
• 2:59:28
  to a to an army base because they wanted so things you wouldn't even have thought some things you
• 2:59:32
  would never even have thought we had another student delivered drones another student delivered
• 2:59:37
  hit no therapy services they literally buy everything the government buys everything another one
• 2:59:43
  did janitorial services another one did landscaping services so they they they buy literally everything
• 2:59:50
  do you feel like there's a lot of waste in the government I mean there's a lot of waste in any
• 2:59:55
  large organization I would say that the main thing and there's of course all the horror stories
• 3:00:01
  of like NASA paid two million dollars for this pen for this pen and the paid like a hundred million
• 3:00:06
  dollars for some covid app yeah and it was like it was a big deal because this was like garbage oh really
• 3:00:12
  sure it was like a two-person company that got this contract that then off-shorted all so it was
• 3:00:21
  scandal but yeah yeah yeah I mean there's definitely waste in any government system but I think
• 3:00:27
  what we need to do is you of course any system could be improved yeah right I think the most
• 3:00:33
  important thing is is that you need to set up the framework for the system to be efficient or
• 3:00:39
  as efficient as it can be so the system the United States has for example where they it's like a
• 3:00:47
  like a blind bidding system right you the anyone who wants to win these contracts has to submit their
• 3:00:52
  best offer and the government is required by law not to tell anyone what your competitors are
• 3:00:59
  bidding or if you even have any competitors you could be the only person bidding on that contract
• 3:01:05
  and the government is not allowed to tell you that and if you knew that you would put your
• 3:01:09
  prices way up right and that's why they're not allowed to tell you that it's illegal for them to
• 3:01:13
  tell you that and I think those kind of rules prevent a lot of waste I'm not saying that there
• 3:01:19
  isn't waste and there's been plenty of situations in the past infamously like with halibut and
• 3:01:26
  you know that they get one a multi billion dollar contracts without a single other competitor even
• 3:01:31
  like competing yeah it was a no bid contract which should be illegal and I don't even know why it
• 3:01:37
  might have been I don't even know what the legality of that whole situation well I know private
• 3:01:42
  like isn't private industry if you're like a fortune one thousand you got to get three bits
• 3:01:48
  you have three responses to an RFP or you invalidate the RFP or you shop it around to other companies
• 3:01:53
  that don't know about it yet like you got it like so it should be the case and it should be and I
• 3:01:58
  think they changed some of the rules after that whole scandal after the the halibut scandal so they're
• 3:02:03
  and that's not to say that they fixed all the problems I'm sure there's still plenty of waste going
• 3:02:07
  on but I think you have to compare it to other countries right so like infamously Russia has a very
• 3:02:15
  corrupt procurement system and we saw that on display in the beginning of the Ukraine war where all
• 3:02:22
  their tires were popping in that convoy because someone in their system in their in their procurement
• 3:02:28
  system bought cheap cheap Chinese tires that were not mill spec and now and they failed in the field
• 3:02:35
  and they probably because that guy was pocketing a few million dollars and that their systems kind
• 3:02:40
  of built on corruption as like an endemic systemic issue and that's why they've had so many problems
• 3:02:47
  so I'm not saying that we should be comparing ourselves to Russia we're a very different kind of
• 3:02:51
  country but but there are ways of building the system to to minimize the corruption and you're
• 3:02:57
  never going to get rid of corruption you're never going to get rid of waste 100% all you could do
• 3:03:02
  is try to set up the system so that it has the highest chance of minimizing that and I think the
• 3:03:08
  United States for all its flaws and for all the bad press that all the bad situations get
• 3:03:16
  by and large is a relatively well run system that's that's my opinion I'm sure the people in
• 3:03:22
  the YouTube comments are going to be very very strongly disagree with me and I think it right now
• 3:03:26
  but I think that when you benchmark it again yeah other countries I think that it's not listen
• 3:03:31
  at the end of the day like capitalism democracy was always supposed to be the best of the worst
• 3:03:37
  right that was always what it was supposed to be right like listen this is always an experiment
• 3:03:40
  so we're trying to figure it out right right it's the worst form of government except for all the other
• 3:03:44
  ones the right right exactly at Western Churchill I think if you I mean I want to so
• 3:03:50
  we'll put everything in the show notes as well as to like where to send people
• 3:03:54
  but just like maybe like one last word of wisdom just for like war dogs academy somebody does
• 3:03:58
  want to get into this tell them where to go for the academy but also just other like words of wisdom
• 3:04:04
  if they want to start things to think about in contracting yeah well anyone is interested in
• 3:04:09
  war dogs academy get a war dogs academy.com well yeah easy enough easy to remember and we also are
• 3:04:15
  on Instagram and all that you know all the major social media channels we've got lots of memes
• 3:04:21
  good as a warm day yeah yeah exactly got to do they got to do the memes people love the memes
• 3:04:26
  apparently it's so funny like we will publish a meme and it'll get like a hundred thousand
• 3:04:31
  views and then there's like a clip of me on a podcast ten thousand views yeah he was
• 3:04:35
  in dude you know it's okay I'm not too insulted no I deal with this every single day I'm like
• 3:04:39
  I started to put out like really smart informative content trying to like help educate you and
• 3:04:45
  improve your life and teach you things and then like yeah yeah it kind of fizzles yeah and then
• 3:04:50
  you do some stupid thing that's even slightly funny and it just like takes off it's just the
• 3:04:55
  way the algorithm works you know so yeah it's it's fine yeah but we try to mix you know we do a mix
• 3:05:00
  you got to do a mix you know get people because different people are just discovering it for the first
• 3:05:04
  time the memes are good for that and then as they dive in and kind of get more seriously get a little
• 3:05:10
  more educated so so yeah so war dogs academy.com same thing on all social media war dogs academy
• 3:05:18
  and I would say that if you want to be successful first of all I would say government
• 3:05:23
  contracting is a great business right as even though I am it's not I personally prefer businesses
• 3:05:31
  that have a little bit more creativity in them you know like inventing products and and things
• 3:05:36
  like that and that's my preference there's nothing wrong with doing a competitive business
• 3:05:43
  like government contracting and there's quite a few advantages to it so I think there's more
• 3:05:48
  I think there's a more advantages than I would say because yeah it's less risky much less risk
• 3:05:53
  yeah government always pays a great customer exactly yeah brainstorming and and inventing the
• 3:06:00
  product yeah it's hard it's very hard high rates of failure the good thing about government
• 3:06:05
  contracting is that the business will never run out and even when the economy and especially
• 3:06:13
  when the economy is in the shitter and when there's a big crisis while everyone else is shutting
• 3:06:18
  down the government ramps up their spending like with covid you know everyone was shutting down
• 3:06:22
  everyone was getting laid off you know but the government really turned on the money printer
• 3:06:27
  there and spent more money than ever in history and where does that money go through the government
• 3:06:32
  contracting system so the government contracting business is not only recession proof it actually
• 3:06:39
  benefits from recession and crises you make more money in those times so there is enormous
• 3:06:46
  advantages to government contracting keeps the complexity maybe annoying to deal with that you
• 3:06:51
  know when you're first starting out but the more complex it is the less competition you have so
• 3:06:56
  there's that advantage that's another advantage of government contracting anyone I do believe not
• 3:07:02
  anyone a lot of people can teach themselves how to do this as my partners did but it is a complex
• 3:07:08
  business especially to start out with and you will save a lot of time and you'll avoid a lot of
• 3:07:15
  mistakes if you have someone you're compressing a time by zoning your academy for 100 000 you'll
• 3:07:21
  make a lot more money a lot sooner by investing in that so I think it's a in fact we've been debating
• 3:07:28
  about whether we're charging too low I mean yeah I'm just thinking yeah to like if I like because
• 3:07:35
  the opportunity to make money in government contracting is so significant that one deal
• 3:07:41
  could be a significant lump sum of hundreds of thousands if not we've had a few students win
• 3:07:47
  but if I think about if I think about like one thing that I would want to compress time on and
• 3:07:52
  even having access to like an officer that's worked in government before like I don't have
• 3:07:58
  budget for a salary for that person day zero so that does seem like a really smart
• 3:08:04
  yeah I seem to look a very smart way to spend money in my opinion at least I listen to my opinion
• 3:08:08
  I guess so I've listened I've interviewed a lot of people that of courses and then
• 3:08:12
  they thumb are yeah some are more useful than others right but I can see it's being quite useful yeah
• 3:08:18
  and it has been and I think the proof is in the pudding as they say that we've had so many
• 3:08:22
  students already win their first contracts and and I told my told my partners in word I was
• 3:08:29
  academy I told them when we first had this idea and we were thinking about getting started I told
• 3:08:33
  them like good I'm like guys I already have a felony conviction this has to be real this can't be a
• 3:08:41
  scam you know the judge isn't gonna go easy on me the second time around so we have to build a
• 3:08:47
  real business that provides real value and that really helps this can't be a flash in the pan
• 3:08:52
  it can't be a scam and we worked really hard to do that and we we've been iterating on the course
• 3:08:58
  as well like as our students have gone through the course and there's been problem issues where
• 3:09:04
  they didn't understand certain things or there was certain things that were missing and we've
• 3:09:09
  iterated on that and and filled in the gaps to me because as I said the more our students make
• 3:09:16
  money the more we make money you know through the financing and as well I had a reputation all the
• 3:09:20
  incentives are aligned and so it's to me it's like it's super gratifying because like I kind of
• 3:09:28
  turned this period of my life that turned out to be a bit of a disaster for me you know and though
• 3:09:35
  I did get a movie out of it with I don't know which is super cool good life and I got good lessons
• 3:09:40
  and it ended up being inspiration for my first invention so I really I'm not like I don't regret
• 3:09:46
  you know the way it turned out I'm happy with where I ended up but honestly I was kind of allergic
• 3:09:55
  to government contracting after that I was just like kind of like traumatized a little and I was like
• 3:10:00
  I don't want to do this business ever again and to be able to build something that can actually
• 3:10:06
  teach people how to be successful and actually watch our students be successful and some of our
• 3:10:13
  students I mean a lot of them are coming from nothing you know they are coming like we've seen
• 3:10:18
  the stories like they're you know we've interviewed a lot of our students who've won the contracts and
• 3:10:22
  we're of course using that on our social media and a lot of them like they're dead broke you know
• 3:10:27
  they're working jobs they hate you know just looking for an opportunity and being able to provide
• 3:10:32
  something where they could actually make that happen for themselves and be proud of the work
• 3:10:37
  they did it and you know they did and and and get out of that job they hate and actually build a
• 3:10:43
  future for their families and you know and be able to be you know proud of what they're building is
• 3:10:48
  just super gratifying entrepreneurship is so beautiful yeah and and it honestly I mean I'm like it's
• 3:10:54
  just super it's super it's a nice use of your lived experience exactly exactly so it's it kind
• 3:11:01
  of feels like I've come like a full circle in a way I feel that I do feel that I mean what you
• 3:11:08
  went through again hopefully no one else has to go through that and we advise our students yeah
• 3:11:12
  everything legally yeah but at the end of the day like it is a very legitimate business it's a very
• 3:11:16
  niche business not a lot of people understand it and I think it's an incredible way to become an
• 3:11:21
  entrepreneur because again you are selling to the best customer in the world and all the other BS
• 3:11:28
  biggest customer best customer most well financed customer and if you if you want to try other
• 3:11:33
  businesses I mean be my guest because I've definitely done them as have you but there's a lot of
• 3:11:38
  other things that you're gonna have to figure out and like listen this is this is why I think that
• 3:11:44
  I I was you know like when you put the other this academy and I was actually I was very
• 3:11:48
  interested bring you on mostly just speak about how you take like your life experience and copy
• 3:11:53
  and paste it across other students because I've always been I'm actually a very good example
• 3:11:58
  of somebody I'm not an idiot but I've always looked at government contracting and I'm like this
• 3:12:03
  is so fascinating but then I'll go to like sam.gov and a bit or you know fuck this like I
• 3:12:08
  it's most people yeah like I have enough is stuff to figure out of my while yeah yeah it's
• 3:12:13
  difficult to learn it's overwhelming it is very overwhelming it is it is and I think that's
• 3:12:17
  and that's why we put so much emphasis on like breaking it into digestible chunks we also have
• 3:12:22
  like little tests you could take to make sure you absorbed it like as you're going through the course
• 3:12:27
  and the course is I would say it's about 18 hours of material but then a community is really the
• 3:12:32
  value immunity is is is is really where you cement all that learning and it's some some of our
• 3:12:41
  students they go through the course in like just a few days and then they're like and then they
• 3:12:45
  start bidding on contracts and then they do a lot they attend the live events the question
• 3:12:49
  answers they they learn even more on top of that and they you know work out all the details
• 3:12:54
  some people take a few weeks to go through the course so people learn at their own paces
• 3:12:59
  but really what it comes down to is you learn by doing yeah you know and the course will give you
• 3:13:05
  a great foundation and the community is going to make sure that you're heading in the right
• 3:13:09
  direction you're not making the obvious mistakes that will cost you a lot of wasted time
• 3:13:14
  and what other places do you want to send people your social or whatever well if anyone's
• 3:13:18
  interested in my social life I'm David Pac-As on all on all social media platforms except for
• 3:13:25
  tiktok which is they that nobody uses tiktok I don't really use it that much either but
• 3:13:31
  it was David and Pac-As on the tiktok but yeah I would say mostly Instagram and YouTube you know
• 3:13:38
  is I'm on there but yeah so from my personal social media handles David Pac-As P-A-C-K-O-U-Z and
• 3:13:48
  there's word i was academy.com instafloss.com tell your friends you know you know get one for your
• 3:13:53
  mother right and for the musicians in the audience singular sound outcome perfect last question
• 3:14:00
  I was like to ask obviously you've gone through a very interesting life if you go back and tell
• 3:14:05
  your 20 year old self one thing what would that be it'll work out I like that don't stress too much