Mark E. Watson III is an investor, entrepreneur, philanthropist, and is the perfect person from which to learn how to show up in life. He was immersed in the entrepreneurial world since a young age, something to which he felt naturally pulled. Being a serial entrepreneur came naturally to him, so much so that when he was a boy scout, he’d go buy candies at a drugstore to sell them later to his friends for twice the price. That’s a funny anecdote, but it shows that entrepreneurship came second nature to him.
After going to law school and business school, he had to face the unexpected with the Wall Street crash of ’87, but he was still able to practice law and learn about reinsurance companies. All this contributed to his growth, which led him to work 20 years in the Argo Group as president & CEO and brought the company from a $300 million underwriter nearing insolvency to a thriving public company with 10 times more revenue. In 1998 he founded Aquila Capital Partners where he’s now fully dedicated.
Aquila Capital Partners
Mark E. Watson dedicates all of his efforts to Aquila Capital Partners, a proprietary capital investment fund with the mission to support the next generation of entrepreneurs building purpose-driven, innovative, technology-enabled companies. Alongside his work with Aquila, Mark is deeply invested in philanthropy through the foundation he created with his wife, AnaPaula Vasquez, where they focus on giving back to organizations devoted to improving the lives of disadvantaged children across the U.S. and in Bermuda.
And now here’s Mark E. Watson III.
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Podcast with Mark E. Watson III. How To Show Up in Life and Go Do It.
people, company, business, mark, thought, reinsurance company, self driving cars, investor, entrepreneurs, insurance, called, law school, talking, acquisitions, years, book, driving, car insurance, venture fund, cars
Mike Malatesta 00:02
Greenline. Go. Okay, I’ll count down 321 And then we’ll get started. Let me just get you up here again. Oh, too many things. Okay, here we go. Oh, just, just, you go about an hour, is that right yeah we probably be just short of an hour. Yeah, that’s fine, that’s okay. Okay, yeah, sure, I mean, yeah, I would say, any longer, it’s probably a lot. Yeah, well it’s, it’s hard to, it’s hard to stop with interesting people Mark I have to say, it’s hard to stop. So anyway, here we go. I’ll get the recording gone
Mark E Watson 00:44
is being recorded. Oh, I have to click OK
Mike Malatesta 00:51
321 Hey everybody welcome back to the How’d it happen podcast I’m so thankful that you’re here listening, and today you are in for another treat because this episode, I am talking with Marquis Watson and Mark is the founder of Aquila, they say that right, Mark. Thank you. Capital Partners, which he founded in 1998 He’s also the chairman of that company. And beyond that, Mark is an investor, entrepreneur serial entrepreneur, maybe we’ll talk a little bit about that and philanthropist as well. His mission is to support the next generation of entrepreneurs, building purpose driven innovative technology enabled companies, and there’s a lot more to it, and you’re going to hear all about it. As we get started so Mark. Oh, I do want to ask also mentioned that Mark’s website is Mark E, Watson, II AI for the third, right, Mark, he watching ai.com. So, Mark, welcome to the show. Thank you for joining me. Thanks for having me Mike, I think also, one thing I left out. You, you, I think you’re a YPO member as well, is that correct.
Mark E Watson 02:11
Yeah, that’s true. I’ve been in YPO Oh gosh 25 years 20 plus years,
Mike Malatesta 02:19
20 plus years. Okay, I’m actually now in YPO gold. Yeah, which is YPO oh yeah and 50 and 50 and over.
Mark E Watson 02:28
That’s right. Yeah, but it’s been a wonderful resource and I have friends all over the world, from being in that organization.
Mike Malatesta 02:35
Well great, we have that in common because I’ve been in YPO for 11 years I think now, I am also in the gold old, but I like, I actually like gold. I like it a lot. It’s been a good experience because you’re always a little bit. We kick you out of YPO when you’re, when you turn 50 And you, you’re maybe it’s better to say that they elevate you to gold when you turn 50 But there’s a little apprehension amongst the members often, because you’re no longer, you know the cool side of YPO or at least it can be considered that way but I’ve had a great experience in gold. I hope you have as well.
Mark E Watson 03:15
I have. So I, as I kind of explained to my younger friends I’m like, Listen, you don’t get to go to why YPO gold until you’ve made it. And
Mike Malatesta 03:25
yeah, oh I like that I fortunately I’ve done okay, I like that, we’re gonna hear all about that. So, Mark, I start every podcast with the same simple question and that is how did happen for you.
Mark E Watson 03:38
Well, you know, that’s a great. That’s a great question, but I have to say, and I know that’s the question you ask. You ask every time, and but it’s not, it’s not really an easy answer. When I was a kid, so I’m going to give it a go. When I was a kid, I grew up with a father who is a serial entrepreneur. Both of my grandfather’s were entrepreneurs in fact one of them was a wildcatter in West Texas back in the 50s. And, and I, you know, I just, I grew up with all these stories at the dinner table and I thought, Man, that’s, you know, that’s what I want to be when I get older, in my case, I really wanted to go into the fall of my grandfather into the oil business, and I worked I actually worked for an energy company while I was in college, but that was not a good time for the for the energy industry, so I went on to law school. And I thought well maybe I can. I was also thinking about going to Wall Street and being an investment banker and then the crash of 87 happened. So that didn’t work out either. And I ended up buying, I had some experience having worked for my father, between college and law school, and I was introduced to the reinsurance industry, turns out there were a handful of law firms at the time in New York City that represented international reinsurance companies doing business with us. And I went to work for one of them. In New York, right after right after law school so I found myself in a very esoteric scary place that I had no intention of being, and it was absolutely fascinating.
Mike Malatesta 05:28
And for those of us, I think I do, but those of us listening that don’t know what reinsurance is Mark, how would you describe
Mark E Watson 05:35
that. So it’s the, it’s the insurance of insurance, and so that kind of led me into understanding this whole world that the insurance industry beyond, you know what we think of is, is insurance, like homeowners insurance or car insurance. And fast forward, my, my first corporate job was taking, taking an insurance company public, which we then sold a few years later after m&a. I then started a Keela as you said back in 98. And, and ironically, one of the very first investments I made was in an insurance company. But I was only thinking about it as an investor, I didn’t realize that I would my colleagues on the board would convince me to come run the thing, and even then I thought it would be a two or three year gig, and then I’d go back to being an investor, and I ended up being a 20 year building project so that’s the, that’s the, that’s the how it happened, or that’s that is the beginning of the how it happens.
Mike Malatesta 06:46
Okay, so I want to dig more into that but first I want to make sure I cover this reinsurance thing because it. So you went to work for this reinsurance company as an attorney Mark, or,
Mark E Watson 06:58
oh I went to sorry, I was practicing law at a law firm in New York, okay appliance we’re in network. We’re primarily reinsurance companies from outside the US doing business in the US,
Mike Malatesta 07:10
okay. Okay and so same so think like, like, think like Lloyds of London, that’s a great example. Right right right right. Okay, so, companies that insure insurance companies, essentially, or they teach, right, yeah. And. Okay, so you started as a lawyer, which is what you went to school for. Did you. I know when we were talking before we started, you sort of had this entrepreneurial. I don’t know, proclivity when you were a teenager, and, and, but then you know you went in and you had this influence from your father and your grandparents, but then you, you decided to go to law school, Did you want to become a lawyer, is that what you were thinking or was it a hey I’m going to put off doing anything I’m going to go to law school for a few years and
Mark E Watson 08:01
I went to I went to law school because I thought it would help me in business. I actually had interviewed with a number of investment banking firms, when I was in my last year at college, and, and they all said the same thing to me which is why don’t you, why don’t you skip the analyst program. Go, go to law school, and when you come out we’ll, we’ll hire you as an associate or a VP and I was like, well that sounds great, but then of course, there were no jobs on Wall Street, because the crash of 87 Yeah. And so, you know I was doing what I think most resourceful people do is they will. Okay, here’s my SWOT analysis and my skills are I’ve got an undergraduate degree in finance. I’ve got a law degree, I have some understanding of the reinsurance business. And I want to go to New York I want to practice law, because the other thing I learned when I was in law school, sadly, is, you don’t really learn how to think like a lawyer, and, and have that, you don’t learn all that experience in the law school or at least not when you go to what we used to refer to as a theoretical law school. And, which I did. And so I realized I was gonna have to practice law for a few years if I really wanted to get the benefit in business. So that was the bad news because that you probably heard most lawyers work 80 hours a week. Well, I still do so I guess that didn’t change but, but I learned a lot in, and I use, I use that knowledge, every day, in, in my business affairs today so it was hard at the time but I’m sure glad I did it.
Mike Malatesta 09:48
And when you went to the reinsurance company then you weren’t hired as an attorney or general counsel or something you went for,
Mark E Watson 09:55
oh, No no no, actually I’m, I was hired as general. Oh, okay. All right. And, and so that was great because I had a I had a ringside seat, both in all the capital markets activity we did by taking the company public, and also all the m&a activity so when I joined the company. I think we had like $25 million in revenue. And when we sold it, six years six or seven years later we had over $250 million of revenue, and, and almost all of that came from acquisitions,
Mike Malatesta 10:27
so it was a busy time, and was that one of these deals where you were working for the firm as a lawyer and they were like Hey Mark, we kind of need a general counsel or was it did it come about some other way.
Mark E Watson 10:42
No, it came about some other way. So remember that company I mentioned that I that I worked for between college and law school, so I got, I got a phone call from my dad saying hey, I know you’re enthralled with the capital markets. I know you’ve been waiting for me to IPO this bank as you keep telling me I should do it. I’m going to do it, come help me. And so I started out in that role, and seven years later I was running one of our, I guess I was running three of our business units. And so, my remit just kept getting bigger. And I’ll never forget I came in I came into his office one day and I said hey, you’ve got this surety but this bonding business and, and, you know, you might want to think about these things, who’s in charge that because we’ll give him the bigger one than thinking about it, you’re in charge now. No, no, that’s not why I’m ready. Well, have a nice day. Good luck in a week and tell me how it’s going.
Mike Malatesta 11:40
I look like you raised your hand for it I don’t know that’s what I thought I saw. Yeah, I guess I was raising my hand.
Okay and so
Mark E Watson 11:54
that that’s, that’s how we got it going. And we built it up and sold it to a strategic buyer a few years later. And then I thought, Well, gosh, let’s go back to being an entrepreneur but having, having had that operational experience. I was thinking that I would, I would get more out of going back and, and taking a different view as an entrepreneur. And in this instance as an investor, and what I was thinking was that given my operational experience in my investing experience previously and also from buying all these companies. I was thinking that I should start a venture firm that was primarily based on early stage companies, where I can bring both financial and intellectual capital to the table. And so think of it, more, more, more colloquially club in the vernacular as entrepreneurs, helping entrepreneurs, right. And so that’s kind of how Aquila got going.
Mike Malatesta 13:00
So you. So this happens really fast, I mean you go to law school you work for a couple years a law firm you go work for this reinsurance company they go, you know, in a handful of years or so, I think he might have said seven I can’t remember a decade now. Yeah, so we’ve covered a decade and there you are, you’ve, you’ve essentially built this thing up and you’ve participated in the exit in a meaningful way. Obviously if you’re going to start a venture a venture fund and I’m so I’m thinking to myself, What else was going through your mind at that point because you’re, you’re, you know you’re a young guy you’re in New York City, pet tremendous success in a short period of time, and you need a new adventure right so was it was it right away, you were like, Okay, I’m going to this, you know, doing a venture fund is the right thing to do or did you think, well maybe I’ll go be a Wildcat or you know, things changed or I’m not on that line, just
Mark E Watson 13:56
so you know it’s funny I did think about that, but I don’t know there were something that just drew me into to the startup world. And, yeah, I just kind of sacked me and I was thinking that, you know I did take enough capital off the table that I could think more as investor and less as employee or operator. And I just thought I what I observed was I’ve heard a lot of my friends know so again, you know, this time we’re coming in our early 30s, who were starting their own businesses, and they had great ideas, but they weren’t quite sure how to turn that idea into a business, or maybe they get a handful of customers right, but they weren’t quite sure how to get that next handful of customers. Okay. And I thought oh okay well I, I think I finally, let’s be clear here. Here I am 20 years later, and I’m doing the same thing today. And I think I finally know enough to be helpful today. So, you know, I was like every other young 30 something year old back then I thought I knew at all. Fortunately I knew enough but ever. It was tough sledding some days I’ll tell you that.
Mike Malatesta 15:15
That’s why I was wondering, that’s it’s kind of behind why I was asking the question because to have that kind of success at that age, and particularly, and I don’t mean to, you know that this I did have some friends in, you know, who, who grew up as investment bankers in New York and there’s just this sort of thing like hey we got this whole thing figured out, right, so here you are at a point where, you know, you could be feeling like you have this whole thing figured out and then I think a lot of people who think they have it all figured out, and have resources and stuff. As a result, maybe 10 not to pull the trigger mark. Instead, they just want to talk about it all the time but you instead. You know, immediately pull the trigger,
Mark E Watson 15:57
so you know. So, let me kind of go back in time a little bit,
Mark E Watson 16:04
I think that story you’re alluding to earlier I was telling you that I was when I was a boy scout we’d go and camp out tonight by Katie at the drugstore and I’d sell it to my friends and bring home twice as much money from the proceeds as I went off with. I was the kid that had the paper round I worked at a scuba shop and high schools and dive master diving on oil tankers in the Houston Ship Channel. When I was 18 years old. And so I, you know, I was always, I was always working mainly because I had to. And then also, you know, it’s funny, my wife was actually reminding me of this last night I was talking about my, my father with with her because I’m thinking about some of the deals I’m looking at now. And that guy was always working. And, and, like, he’s right. I think he rubbed off on me because I’m just always going even during COVID I was on an airplane, you know, we all locked down in march right well, I got on my first plane and went back to work, by looking for deals, and, you know, I just, it’s, like, once you. It’s a little it’s a little imperfections and sorry about the door ding on the hotel room. That’s what happens. It’s a little infectious, and I think once you have that mindset, you just can that the it just never goes away.
Mike Malatesta 17:33
Okay, well, that Thanks for clarifying that. For me, I especially like the story of doubling your money on the candy that’s taking advantage of all, you’re not quite as business savvy fellow Boy Scouts, that’s great. I like that. I had a captive audience, and I was the only supply. Yeah, and willing buyers. So, you know, what can you do,
Mike Malatesta 17:58
so you So, did you start the fund, or the you know the Aquila by yourself marker, did you have, did you go out and raise money or what did you do. Well, you know,
Mark E Watson 18:09
so the answer is, I had one COVID In the beginning, and he went back and he went off back to his restaurant businesses, and I think I was mentioning that one of the first investments I made was in an insurance company that today is called Argo. And I got so involved with that so quickly that I actually never raised the fund. And that that ended up consuming my life before I could actually finished the fundraise.
Mike Malatesta 18:43
Got it. So you’ve operator. So your first venture investment became your career I think was the third, third, okay. So what it’s so that’s interesting because, um, you know, I’m involved in a decent number of private equity and venture funds myself and I haven’t found. I don’t I can’t think of one experience where one of the no general partners was like hey I love this business so much that we invested in and I’m gonna go, you know, run it day to day they sort of, that’s sort of, actually not what they’re built for they’re built for the financial engineering they’re built to support and that kind of thing but run day to day and not unless they have to.
Mark E Watson 19:32
Well, so remember go back to what my, what my, what I was saying earlier, which is my whole investment thesis behind starting it was entrepreneurs helping entrepreneurs. Yeah, okay. And, and I guess I, so I, I won’t say that, that I was in, I’ll just refer to myself as an active investor and what I mean by that is, after I after the board invited me to join the board of directors given my given my background which we were talking about earlier. Sure, I, I offered a lot of unsolicited advice, of how we might want to change the strategic direction of the company.
Mark E Watson 20:13
most of my colleagues on the board were literally in their 80s and they, they, they were the guys who started Teledyne back in the 60s. And they said okay, smarty, you know, why don’t you. Why don’t you actually come take this idea that you have and turn it into reality and come run the bank. And I, I said okay, it’s. I, as I said I hadn’t planned on it but you know, actually, the playbook that we ran for the first few years was exactly what we’ve been talking about around the board table for a couple of years, and, and it worked. Now we took a company that was really struggling. Both strategically and financially, and then grew and pretty rapidly once we changed the strategic direction of the company. The first few years a lot of that. I bet you won’t be surprised to know a lot of change came from, from making a series of acquisitions that allowed us to create a platform. And then, and then we were able to grow it organically. After that, but it was more than one reinvention of the company. And of course we did have a few of those moments where we were trying to figure out how to make payroll but main I think, I think every, I think every entrepreneur goes through that at least once in their career,
Mike Malatesta 21:41
right. I love how the board sort of turned the tables on you and then normally it’s like hey, put your, put your money where your mouth is, but in this case it was, it was like Hey, Mark put your mouth where your money is, like, if, if,
Mark E Watson 21:55
you know what was what was really cool is these guys, you know, they started Teledyne back when they were in their mid 30s And so they’re like Well, look, if we could go build that why can’t you kind of, you know, turn, turn our company into something, and, and, well, we did. So it was, I’ll tell you what, in hindsight, it was. I can’t tell you how rewarding it was to have those guys in trust me, and the whole team to go build the company.
Mike Malatesta 22:26
And how can you take us through, I mean, you mentioned the acquisitions and stuff but, You know how do you how do you, how did you take the company or help take the company from 25 million in sales, learn it losing money and 25 million seems really small for reinsurance sorry though that was, that that that was the previous company. Oh yes, I’m sorry, I’m sorry.
Mark E Watson 22:50
So, yes, so just to give you some yardsticks. So when I, when I took over, Argo, it was a little under 300 million in revenue. Okay, all right. When I retired. A year and a half ago it was three and a half billion. Okay, so it was mainly your regional company in the US, and we we transformed it into a global business with 20 offices around the world and and clients in 60 plus countries.
Mike Malatesta 23:23
And that was over approximately a 20 year period. Guys ready. Okay, so I’m gonna ask you this first because I’ll keep the business aside and I’ll say, Mark, what, what did you not know going into that because that’s huge, going into that huge $300 million company. And then leading it to three and a half billion what, what did you not know that you ended up knowing as you went through the, the, the tenure there I guess
Mark E Watson 24:01
the biggest, the. So would you know insurance companies have pretty big balance sheets, and by the way when I took over the company they just celebrated its 50th anniversary. So, I mean, you know that’s a testament of time in and of itself for the company. Yes, but along the way, it had, it had insured, a whole lot of businesses, then had collected a whole lot of what I’ll call latent exposure. Asbestos environmental claims you may recall all that drama from the 70s in the case of environmental as best as in the 80s. In fact, at one time the company was the largest medical malpractice insurer in the 70s and that almost took the company down in the late 70s. And, and so just to summarize, I would say all these latent exposures were sitting on the balance sheet because the company had had been around so long and what stood the test of time. But, but that history kind of caught up to it. And while I had spent a lot of time, diligence in the balance sheet, it’s really hard to understand the legal environment that you operate in that can change on a dime, and then both at the federal level in the state level in California. A lot of a lot of regulations change which meant the exposure on the balance sheet change, and a couple of years in we found ourselves having to reset our loss reserves which meant the liability side of balance sheet went up and the asset side stayed flat, which means the equity side goes down too. Right,
Mike Malatesta 25:49
so you’ve been, you’ve been, you’ve been ensuring risks that nobody considered to be risks at the time that the policy was written and then later due to governmental changes, regulatory changes, or just people actually getting sick from, you know certain things, changes the whole dynamic is that,
Mark E Watson 26:09
that’s right for medical innovation. So, oh yeah living people living longer, because, because there is so much more medical. There’s so much more help that can be provided from medical industry today or the health industry today. So, we read that art so the good news is that we were able to reset our loss reserves, but that meant we had to go raise more capital, and, and there was a bout a six week period where we were not quite sure where we were going to raise enough capital to keep going, hence my comment about making payroll right. And that, that I’ll have to say in hindsight that was, that was probably, you know, the biggest gut check of Hey man, can you really do this. And, and I’ll never forget one one Bryden in the winter is raining and I’m like, How are we going to figure this out. I ride up the elevator from lunch with one of our employees. And he said, You know what, you know, my wife, she told me I should get a new job and I said why is that, and, and he said well, she said you’re going to go out of business and I’m going to need to find another job and I said Oh really. And I said well what do you tell her, he said I told her you figure it out, and we didn’t need to worry. And, you know at the time we had about 850 employees and I was trying to figure out how we were going to make payroll for 850 employees. And then I realized it was, how am I going to put food on the table for 850 families. And so that was Friday afternoon, and by Monday morning, I had I had figured it out, and spent the whole weekend, meeting people that, that became investors in the company and one of them, a strategic investor in the company. And, and, which was great. And at the time we in our plan our strategic our strategic plan was already working. And so, we started moving very quickly in the right direction. And those investors who, who put their money in, back at that time, did very well. They had, oh gosh, I think a 10x return on their investment in five years. And what was the story you were telling them Mark was it,
Mike Malatesta 28:29
hey you know we’re this close with our new could see the attraction of our strategy I mean, I’m just, this is very this is can be a very good lesson for people who are facing something similar, you know that you know the, it doesn’t happen like you don’t go to somebody, and our business is doing like it’s doing crappy, we might go I can’t make payroll, would you invest, it’s not. That’s how it works right it’s right.
Mark E Watson 28:56
Yeah, so the good news is, the strategic decisions that we made a couple of years earlier. And one key acquisition that we had made, we’re already paying off. Okay, and so we were growing our top line by 30%. And the bottom line for from the new business coming on you can see the profits coming there. We just had to get over this hump of what had happened on in the past that we had to account for on our balance sheet in the present, so you can you can see the growth of the company and where it was headed. And literally, we went from just under $300 million to, you know, Almost 1,000,000,005 or six years later and top line, and, and a lot of that just went straight to the bottom line. And again, you know, that was for both acquisition and organic growth but a lot of that was from making some, some very good acquisitions and so the investors can see the numbers from, from the acquisitions, and by the way that’s not so easy to get right either. And so, there, there was a lot of execution risk but you can just see in the numbers that it was working. And also we just kind of kept her head down and kept going
Mike Malatesta 30:19
to be the developer that was riding with you in the elevator or come back and say, Mark. See, I was right. I knew you could do it many times. Oh okay. Nice. All right. Okay, so you get to, you get 20 years in there and then I can’t remember is the company sold or do you what happens. What happens when you, when you end up leaving. I retired and then the company kept on going. Okay. So you wanted to get back to entrepreneurs helping entrepreneurs or what was the motivation for for you, we,
Mark E Watson 31:00
well I did, well that’s that’s a whole nother long story for another podcast but I had, I had, you know, when you’re planning to do something for a couple of years, and you’re planning to be an investor and you wake up. 20 years later, and you know you’re we were talking about YPO earlier so this is actually what happened. I’m sitting in the back of a classroom at the Harvard Business School for a program they put on for YPO. So is the YPO presidents program you’ve probably heard of it. And I’m sitting in the back and I’m like, Man,
Mark E Watson 31:38
yeah I know how to do that. Yeah, and how to do that. And when plenty things I was learning to, but I just realized that the doing, you know, we had reinvented the company three or four times and that was all really exciting. But, but the entrepreneurship was, was given way to can we be better at process. And you probably observed the people who are very entrepreneurial or not so good at
Mike Malatesta 32:04
Mark E Watson 32:06
so I found that most of my time was being spent doing process and I just thought, I got to get out and move on. And, and I’ve done my, my time as an operator and I’d like to go back to being an entrepreneur and being an investor again,
Mike Malatesta 32:23
because really simple. Okay, fair enough. It’s really that simple. And the name, Aquila, where did that come from, what, how did you land on that, that name.
Mark E Watson 32:34
Well so Aquila means Eagle Right, yeah. And to be honest I was driving, I was driving down the road, and there’s this resort ski resort up in Colorado near our home in Colorado, and I like their logo. And I was like blinds. Cool. So, anyway, there wasn’t called tequila. And of course, I don’t have their logo because they trademark their logo but I
Mike Malatesta 33:00
just, I don’t know the idea this game. Okay, that was the inspiration I was calling. Yeah, okay. So now you’re out of your back as an investor, entrepreneur, what’s, what’s your life like now what are you doing. Well,
Mark E Watson 33:18
it’s, it’s, it’s just as as sporadic, as, as it was before, I’m still working just as many hours as I was before, but now I’m spending all my time helping the, the CEOs of the portfolio companies that I’ve got, well not all of them but you know that there’s usually, there’s usually two or three that that call. And it’s different, two or three each time that need a little help thinking through their strategy. And, and where they want to go next, or can I make a phone call for a client, they’ve got more or more help with the next round of fundraising, there’s always something going on. And, but what’s really fun is, is, you know for every company, building a business is building a business, it really does matter what industry you’re in. And then so helping people who’ve done it for the first time is really, it’s rewarding financially and professionally. It’s also, you know, a really nice gift back to to younger mainly younger people who were doing it for the first time. And so all those things that I thought I could do 20 years ago. I really can do today, and it’s been, it’s been really rewarding, and no sir my my wife earlier, and she said you know I can tell you’re having fun and I said why is that she is because it’s, you know 10 o’clock at night and you’re still on the phone talking to people and I’m like, yeah, sorry. I guess I’m back to the same thing again but it’s, you know when you, when you do, it’s fun.
Mike Malatesta 34:55
Yeah, yeah, sure, it’s, it’s definitely beats the alternative Mark isn’t it.
Mark E Watson 35:02
Well you know it’s funny you say that because one of one of my mentors was actually one of the original investors in in Teledyne and then and then are down, and, and he’s still in, he’s in his mid 90s Today, he still goes to work every day and every time he and I, you know, get together, which is two or three times a year. So now going on, you know 25 years. He asked me if I’m going to retire, and I said no and he’s like, that’s good because my friends who retired, they’re not doing very well. And look at me I’m still doing okay. And I think you ought to think about that, and I look around my friends who you know are in their, in their 70s and 80s, who are still working, which means they’re still mentoring me. And, and they’re having just as much fun today, intellectually, as they were when I met them 20 or 30 years ago. And so, it’s, it’s just a reminder that there’s always something new to do. And, and it’s fun. I mean, if you find the right reason to get up in the morning and go in, you know, it’s, that’s what matters. Right. I mean, it probably could just as easily be a hobby, it doesn’t have to be building a business that just happens to be my hobby.
Mike Malatesta 36:29
Sure, yeah. And it’s so, it’s interesting you say that because I always think of myself as someone who is not going to retire because I feel like there’s always some new is always going to be some new challenge in front of me that, that, that I’m curious about and that I want to pursue, whether it leads to money or not as sort of a second. Second thing for me but it’s also in both retirement is something that, you know there’s a lot of inertia towards there’s a whole industry that, you know, sort of, sort of makes, makes the whole, whole industry and insurance industry actually that makes you know retirement seem like the Holy Grail like if you can just get there it’s gonna be great. And, and I’m sure for some people that’s exactly the way it turns out, and then I think I feel like there’s a lot of other people who get there and they’re like, This is it. This is what you know I’ve been saving for this is what I’ve been putting off other stuff in my life for to get here and then it’s like, wow, and then, and then they become a volunteer greeter at Walmart. Yeah, where they Yeah, where they lose purpose, you know, they lose purpose like you said, your mentor said about some of his friends you know when you don’t have a future to look forward to you, you’re, you know you’re stuck say in the past, and it’s, it’s, it’s just interesting,
Mark E Watson 37:55
right, you know, but right now, is such an interesting time in the history of business, because technology is so available. And so inexpensive to so many different businesses, I mean, there are things that. And by the way, that was another reason that I wanted to kind of move on from Argo, is, is, you know, companies that have been around a long time have a lot of legacy systems as well as those liabilities that we talked about on the balance sheet. And technology is changing so quickly today that it’s allowing for new business models in everyone talks about disruption, I don’t want to say that everything, I look at has to be disruptive, but the world rapidly today there’s so many new business models today that are changing industry after industry that I really want to. I want it to be a part of it, and, and I am, and it’s really exciting because the world what, and of course, looking at what COVID has done to two business models over the last year. If you didn’t have a digital strategy. A year ago, you probably went out of business, or you really struggled. And look at how many companies pivoted to, to create their did their digital business model as quickly as you could. And look, I’d say, here’s here’s two to two different companies to think about as examples. So, Nike had already started their online store, but it wasn’t the majority of their revenue. And almost all of their business flipped to the online store, sorry. When I say almost I mean, I believe, a majority of their business flipped to their online store and in less than a year. Adidas didn’t really have that, that direct to consumer online presence, and so they really struggled whereas nine at Nike or Under Armour two they both kind of struggled where Nike just took off. Now, both of those companies have pivoted and now have digital strategies but, but, you know, think about think about the insurance business just as an example or pick any financial services company, it’s mainly, you know, data in people. And so, with so much technology available today, it’s somewhat easier to deliver create new products and deliver them in a much more robust and cheaper fashion digitally,
Mike Malatesta 40:34
connect so I want to ask you a couple of questions about insurance, and then I want to get into a little bit about future like what you’re excited about from a technology standpoint but on the insurance side. How do you see, and maybe this is sort of a futuristic question too, but how do you see self driving cars, impacting, you know, a huge part of the insurance market which is, you know, the insuring drivers. And then how do you see how do you see AI models like lemon and some of the lemon and some of the others that are sort of a, you know, that are, that are, they’re sort of, they’re sort of trying to, they’re sort of working on Democ democratizing the world said, two questions they’re both related to the future of regular insurance, and they might these might not be.
Mark E Watson 41:39
Yes. Let’s take them in remote and reverse order. Yeah, so one of the, you know we’re talking about differences in business models with technology. And actually, lemonade is both a good and not so good example of that. It’s a good example in that the founders of lemonade recognize that the user experience for consumer insurance or frankly all insurance for that matter, is not very good. And so they figured out a way to create a much better front end user experience for their customer base, which until recently was, was, you know, young people. First time. First time renters apartment, providing renters insurance so, you know, publishers for people who are renting Right. And, and the user experience is really good but the product that you’re actually buying is actually just a commodity, it’s the same insurance product that every other insurance companies selling there just do a better job of selling it with the user experience and now as they expand their product offering and trying and into homeowners insurance, and to car insurance, you know there. That’s a little bit more complex, it’s one thing to say hey, send me a picture of you know whatever was in your apartment is not there to your home burns down, and or you get in this massive car accident. So how you been claims handling process which again is user experience is going to be a lot is going to be vastly different. Okay, then, then, then the short answer so I think there’s a there’s a lot, a lot to be learned, and I’m sure that the learning, but to kind of segue into into car insurance from self driving cars you’re right, there’s there, but first let me say people have been talking about self driving cars for a decade. And we still don’t have them, and the release date for when self driving cars will really be on the road keeps getting pushed back but I think it’s inevitable. And of course, as you pointed out a minute ago my, my new bike, car insurance today, you’re insuring yourself, the driver, whereas in the self driving car the, the, the, the policyholder is probably the, the car manufacturer. So you’re going from a liability. A personal liability policy to a product liability policy. And you also quite correctly touched on, on AI, because you know what, why do we have car insurance Well, mainly because we have car accidents, not because of theft, or, or, or, or other ancillary claims, mainly because we have accidents. So what happens when a self driving car runs into another car, who’s, you know, how are we going to figure out who’s at fault and what happens there or, or here’s the really just a really tough one right now which people are really trying to think through ethically and that is so self driving cars coming down the road. And it sees a child jump out in the road. If it’s worse to miss the child in the road, it’s going to hit an oncoming car, and kill the people in the self driving car, and the people in the car collides into. So, from a societal perspective would it be better off to just go straight and drive over the child and only kill the child versus have the collision and kill the peoples in the two cars right now, maybe, maybe that’s not what you meant by AI but that sort of these are real. These are real ethical and moral issues that have to be sorted out before self driving cars get on road.
Mike Malatesta 45:57
Interestingly though, that’s no different than, say, I’m, you know, using the same thing, and saying, but putting me behind the wheel and saying I’m driving I still have the exact same dilemma when it comes to that situation, right,
Mark E Watson 46:12
right when it happens to you, yeah, it happens at that moment, and it’s impulsive. What I’m talking about is premeditated, it’s in the code of the car. This car gets delivered to the to the consumer. I see no consumer can’t choose right, the product manufacturer chooses.
Mike Malatesta 46:35
Good better brakes, that’s how you solve that so you don’t, we’re not going to solve it today but quantum breakthrough,
Mark E Watson 46:43
there’s some real issues to be sorted out, but by the way, I’m looking forward to the day when I if I’m just gonna go get on a freeway that the car can do the driving and I can do something else. Right. Have you seen those cars be about technological innovation, have you seen those cars that have the conference table in the middle, and the seats face each other and there’s no steering, I have,
Mike Malatesta 47:06
Yes, you’re cool, they’re very cool. They’re very cool, it would be tremendous to not have to worry about driving, even though I actually like driving but to me it would be tremendous. To be able to get in a car and just do whatever I want, and show up safely ready to go wherever I’m supposed to go.
Mark E Watson 47:27
Like you, I, when I’m in work mode that I prefer that. But if I’m, you know, out in
Mike Malatesta 47:34
the Texas Hill Country on the weekend, okay yeah good I want to go drive. Yeah. And that’s actually going to be very interesting is even, even when self driving cars come along in a, in a much bigger way. You still gonna have this convert this, this sort of intersection of people driven cars, self driving cars it’s not going to be like one day, everybody puts their keys away and never drives again. And so, you’ve got that component too but anyway a whole nother story I don’t want to get into that, but I do want to get into what you’re most excited about, you know, from a technology enabled, like from an investment and entrepreneurial standpoint right now.
Mark E Watson 48:17
So we talked, we talked about seven or two minutes ago but what are the other things that I’m really focused on seeing change in the economy. Are these, these massive platforms that are being created that have winner take all economics, And they’re resulting in market caps of 1020 $30 billion. And so I’ve been, I’ve been really focused on on finding companies that I think have the other side potential, because it’s really hard to pull off, but have the potential to become a platform and there’s, there’s one company in the Aquila portfolio, that, that I think is well on its way to becoming a platform and and achieving some of those platform economics, and it’s not in the, it’s not in the in the insurance industry. It’s actually in the hospitality industry but it’s it’s a software company that’s more of itself into a multi sided platform.
Mike Malatesta 49:24
And it Do you are your portfolio companies on your website or do you keep those private, or how do you do on their
Mark E Watson 49:33
on their on the, the, not all of them, most of them are, are, are on the Akilah capital website, and bad websites, Aquila VC calm,
Mike Malatesta 49:44
Killa VC, calm, okay. So, I guess I wanted to ask you a couple of other things before we add mark one is this personal brand that you seem to be developing so you’ve got your own website. Now, it’s not you’re not doing everything through Aquila. And that always fascinates me. I have my own website as well. But I did it for my podcasts and stuff and I kind of didn’t put much more thought into it, but are you intentionally, you know, looking to build awareness of the Mark Watson brand and if so what, what led you down that that path.
Mark E Watson 50:24
Yeah, so the, the two websites were very intentional, but not, not for brand building purposes. For my personal website. I wanted to focus that more on leadership and helping business leaders build their toolbox. And so, over time, you know, this is still a work in progress. And but over time I wanted to take all my know how are lessons learned or not learned, and, and put them out there, you know, in kind of the the toolbox for people to use so kind of like, you know, a reference manual. So, books that have helped me along the way. Other key people that have great skills that they can access I wanted to I wanted it to be kind of more of a reference place for business leaders, and, and a place to think about leadership. And so the killer website is just, just purely investing. Okay. Okay, got it.
Mike Malatesta 51:35
And since you mentioned it, books, you know what are one or two of your, you know, favorite most impactful books that you recommend to people.
Mark E Watson 51:48
John doors book that came out a couple of years ago on OKRs. Brad smart trilogy of books on top grading so that’s, you know his brand and the selection, any book from rom Charan. Full disclosure, he’s been an advisor to me for 20 years, but you know he wrote. He wrote a book with Larry bossy called execution. Yeah I think that’s a pretty helpful book to anybody, but he also wrote a very small little book about how to, you know, build a profitable company, and I mean it’s, it’s like a two hour read but it’s one of those books that you ought to go back and read every year just to remind yourself of what it really takes to make money, and, and he begins his story by talking about, you know, how, how, how his family made money with the fruit stand that they had, or the vegetable stay and they had in India. And of course he left India, and went on to become very successful as both a student of Harvard Business School faculty member of Harvard Business School, and an advisor to Jack Welch, among others.
Mike Malatesta 53:06
What is that little book called Do you remember the title of
Mark E Watson 53:09
that. Yeah, I think it’s called. Yeah, I’ve read so many times you think I ruined dang but it’s, it’s called profit it is called Sustainable profitable growth, but
Mike Malatesta 53:20
okay. Okay, so, um, I was reading this article that you, that featured you in leaders magazine which by the way I was not familiar with leaders magazine when I first saw that I thought to myself, oh okay this is that YPO sort of real leaders magazine but it’s different. but anyway, they asked you this question. And I was just fascinated by your answer. So, this is the question they asked me during this difficult and uncertain time. I think this was from late 2020 Maybe. What would you say to young people across the country who are deeply concerned and uncertain about the future. And you said a lot. Basically you said, Stay, stay off the sidelines. Realize that you can create structural change in any space. Put down your signs and your phone that really got my attention because those will not lead to sustainable structurally, to a sustainable structurally changed future that you want. Can’t hashtag your way to the future, I thought that was brilliant, too. So, what, tell me more. Well,
Mark E Watson 54:37
should I say that, I mean that’s the answer right. And it’s also in the context of what we’ve been talking about for the last few minutes which is the world is changing rapidly around us. And, and it’s becoming more and more digital which means is becoming more and more democratic, and it’s becoming more, it’s, it’s much easier to get involved today than it’s ever been, and so much more in the economy is going to be peer to peer. You don’t have to go join some large, gigantic company. You can go hang out your own shingle, you know, a minute ago you were asking me if I was trying to build my own brand because that’s become a very popular thing to do. Yes, because peer to peer. Business is becoming so pervasive in the economy. And I think will become more so, and you’ve got enabling platforms to do that right, Amazon and Facebook, you know, funny, people think of Facebook is this big bad company and to the extent that it’s encroaching upon our private lives I think that’s true. But look at the marketing. The marketing ability of small business owners to actually target their customers today, much, much more effectively than they could with, you know all those mailer things that show up. Post Office products at home. And so there’s just, I mean, every part of the economy is being turned upside down, and it’s an invitation for young people that have got great ideas and energy to just show up and go do it. And that’s what I was getting at in the article and I, I feel more strongly about it today than I did then.
Mike Malatesta 56:23
Just show up and go do it. I like that. That’s a great place for us to end mark that’s, that’s been fantastic i. This has been so much fun getting to know you and and about your experiences and sharing them, I, I guess I’ll ask you at the end, is there anything else you want to add, put out there how to get ahold of you or what do you want people to do or whatever besides what we’ve already done with your various websites and such.
Mark E Watson 56:50
Well first I think I think you ended up, did you ended on a Groupon a great spot if people do want to do, if people do want to connect with me peer to peer, probably the easiest way is to send me a message on LinkedIn. If you just go, go, search, Mark Marquis Watson and Aquila,
Mark E Watson 57:10
it’ll take you to my, my LinkedIn page, and that’s probably the best place to connect with me.
Mike Malatesta 57:16
Okay, that’s how I connected with you this morning. I sent you a LinkedIn invite. So I’m looking forward to being part of your network and Mark, it’s just been so great to have you on. Thanks so much for doing this. Yeah, it’s a pleasure. Thanks for the time I recording head stop. Okay. Well, all right, I thought it was great. Did, did you feel like it was okay we go in and directions that we’re okay with
Mark E Watson 57:45
you. Yeah, no I thought we covered a lot of nice things in, and what I thought was great is that we actually did get to have a conversation. And, and, you know, I’ve only done a handful of podcasts, but they always go in different direction that I think they will, which is always fun because then it’s spontaneous.
Mike Malatesta 58:03
Yeah, well good I’m glad so the spontaneous part is important to me because I know that there are podcasts out there that say okay mark here are the 10 questions I’m going to ask you or whatever and there’s, that’s fine, that’s, there’s nothing wrong with those but it’s just not me I just don’t want to. I don’t know I just don’t feel like that’s the right thing for me I like to kind of go wherever, maybe ask you something that you haven’t talked about in a long time it’s not throw me a curveball at the end but it was really good. Well I tried to, I know how easy it is to kind of forget about what you, you know these stuff so I tried to give you enough to, to not, you know be unfair. You know, listen,
Mark E Watson 58:50
I’m glad you asked me that question because, you know my audience, are there, my, my, the people I’m trying to connect with are people who were in their mid 30s today who have said, Man, I’m going to go do something, and they need help to do it, and they don’t necessarily need me to invest in their company and that hence the kind of toolbox thing that I’m setting Yes, first of all website.
Mike Malatesta 59:17
Right, right right right. Well, I love how you explain that because I, you are writing this being becoming a personal brand is very very popular now and I think a lot of people. I shouldn’t say that. I think there are some people who are doing it for, you know what I consider to be good, helpful reasons and there’s other people who are doing it for other reasons, other
Mark E Watson 59:44
reasons, some of them, right, some of them think that’s the end game and they don’t, they don’t appreciate that that’s just the way to then connect with the people that you want to do business with, right, right, and, and so they think that’s another way of becoming an influencer, which, which may have been in the back of your mind and it’s like no that’s not what it’s all about it’s, it’s how can you do something more peer to peer with other people, but you’ve got to bring something to the table. Besides your website,
Mike Malatesta 1:00:11
Mike Malatesta 1:00:14
Well you’re very easy to talk to I do appreciate you doing this with me while you’re on the road and you know making filming events so it’s been a lot of fun. I really appreciate it and it’s always good to connect with a fellow YPO Golder, as well.
Mark E Watson 1:00:28
Yeah, hey listen, if you, if you haven’t. If you haven’t been YPO presidents program, I would encourage you to check it out.
Mike Malatesta 1:00:37
Okay, I have not done it.
Mark E Watson 1:00:39
Yeah, if it’s of interest to you, let me know and I’ll, I’ll send a note to the program chair because the waitlist is pretty long.
Mike Malatesta 1:00:48
Okay, I’ll do that and I appreciate the offer. Thank you. Okay. Have a good day mine. Okay. You too, Bye. Bye.