Paul Gray: So, take us back to your early days. Where did you grow up and what did you study?

Louis Spagnuolo: I grew up in Boston from a very humble beginning, and I didn’t really have any role models per se. There was no internet; there wasn’t any cable TV.

It’s not like the world we have today where we have everything instantly on demand. So, basically, I became familiarized, with what was called a library. Which, we don’t really have too many of them anymore. But at the time it was really an incredible center for knowledge where you could actually learn things
and read about things.

And that’s where my fascination really started with business because that was really the only place I was able to get exposure to it. Because there were no business television channels. I couldn’t afford magazines at the newsstands; books were very expensive. So, being able to go to the library gave me that
exposure of what it’s like - business economy, finance, things like that. So, from a very young age, I was always very interested in it and spent a lot of time at the library.

And then, applied that towards my schooling. I went to St. John’s Prep, a private school, and that prepared me to go to the University of Miami where I got a degree in finance. And that’s how the whole career kicked off.

Paul Gray: Wonderful. And where did you get started in finance?

Louis Spagnuolo: Originally, I didn’t even go into finance. Originally, I was an entrepreneur in college, and I started the import/export business where at the time cell phones had just become mainstream. And back then, what people didn’t realize was, we used to have, what’s called, nicad batteries on the cell
phones. And they used to only last about six months.

And then, you’d have to throw them out and buy a new battery. And it was kind of like the razor/razor blade business analogy, where you buy the phone and then every six months you have to spend $200 and buy a replacement battery. And I was like, “wow this is crazy.”

So, one day I was in my apartment. I was at college, and we were having some trouble with some of the import/export business we were doing. And I got a little overly aggressive and grabbed my phone, and I threw it against the wall. And I smashed my cell phone, which at the time was probably $2,000. It used to
be very expensive.

And it shattered all over the living room, and I couldn’t believe it. I’m like, “I can’t believe I just did this.” And it’s in like a million pieces. So, I’m thinking, “okay, let me see what’s going on here.” And I’m thinking there’s probably going to be like some high tech, special liquid battery, something to power this device. It was a pretty big device at the time; it was a handful.

So, when I’m looking down on the ground, I see these AAA batteries. And I’m like, “I don’t remember dropping batteries on the floor.” So, I grabbed the pieces of cell phone, and I realized the batteries to the cell phones, they were just chargeable AAA batteries. And there was like eight of them.

And I said to myself, “how could eight batteries be $200? Like, how is that possible?” So, I started looking into it, and again, at the time we didn’t have the internet. We really didn’t have the worldwide economy we have today. So, I picked up a magazine, and I was able to contact a procurement specialist in
China who I was able to speak to.

And he told me to send him some samples of what I wanted, and then he would replicate them and then send them back to me. And this took a long time. It’s not like today. It took about six months between getting them there, getting them back, getting it processed, and getting where we wanted.

And we got where it was able to fit the phone and work on the phone. We tested it. And at the time there was maybe only three cell phones - Motorola, NEC, and one other. So, we didn’t have a lot of phones that we had to have batteries for, which was good. So, we finally got the invention perfected.

And I asked him, “alright, how much is it going to be?” And he said it was going to be, I think, three twenty-eight. So, I’m like, “three twenty-eight, alright how many is that for?” Like $328, I’m thinking, “alright I better get at least like 10 of them or something.” And he goes, no, per battery, $3 and 28 cents.

So, I’m like $3 and 28 cents for this whole cell phone adapter battery. He’s like, “yeah”. So, we ordered like a thousand of them, and we were all excited. We have these batteries. Everybody else was charging $200. So, we figured we’d go to all the stores, and we’d sell them and make a fortune.

What we didn’t realize was that the phone manufacturers basically had a monopoly back then. It wasn’t like AT& T, Verizon, Cingular. It wasn’t like that. It was kind of like mom and pop shops. And to have a Motorola franchise, you had to buy the Motorola accessories, and you had to only sell the Motorola
accessories.

So, we were denied access to any distribution. So, we’re like, what are we going to do with all these batteries now? We have all these batteries. They work for these phones. There was no eBay. You couldn’t put them on eBay. So, finally we decided that, okay, let’s try exporting them because in different countries the
rules aren’t as stringent.

And a couple of the kids that I went to school with were from South America. So, long story short, we started exporting them to Venezuela, Colombia, all the South American countries. And it just blew up because the prices for the batteries there were even more than the United States. So, instead of $200, they
were like $300 there.

So, we were able to charge like $89, $99, and we couldn’t keep them in stock fast enough. And that’s how we were doing it - defeat, and then retreat, recalibrate, and then shoot again. Which, we kind of joke around about all the time, is so important because sometimes you can plan everything. You think it’s perfection. Then, something happens, and you have to be able to adjust. And luckily, we were able to adjust with changing our distribution to South America and not the United States. And that’s when that really took off. And that was the beginning of everything that funded all the different ventures.

After I did that, I went into restaurants. I went into real estate. I then went into the venture capital business in the late 90’s. I wanted to get into this internet thing. I thought this internet thing was fascinating. A lot of people said I was crazy, and that it’s never going to last, newspapers are never going away. And I was like, “ I got some money. I don’t really need an income. And I ended up going to work for a venture capital company in Boca Raton where the old IBM PC was first invented. And what happened was fascinating. Everybody in
the company was acting like they were rich.

And I couldn’t really understand it. I’m like, “how is the receptionist at the front desk a millionaire.” I’m like, “I didn’t know, receptionist made millions.” And everybody was just relaxed. Walking around the office, everyone always had a smile. They had their stock options, and they were just counting their money.

And I was like, “wow, this internet business is unbelievable. You don’t even have to work hard. You really don’t have to do too much. You get these things called stock options. You become a millionaire.” I was like, “I’ve been working so hard my whole life here.” I almost missed the boat on this. Thank God I found this thing.

So, time goes on, and all of a sudden, we have the internet meltdown. Well, what happened was, we had 33 companies that we invested in, and they all went bankrupt. They all failed. So now we went from everybody in the office being millionaires to now everybody in the office is crying because all their stock options are worth nothing. But I’m sitting there in the office saying,” this is like the greatest gift we could ever get.”

And people are looking at me like, “you’re crazy. We were all millionaires like 10 minutes ago and now it’s worth nothing.” And I’m like, “no, you’re not seeing the big picture.” And they’re like, “what are you talking about?” And I said, “there’s no way in one person’s lifetime that you could ever intimately see 33
companies fail.”

It’s impossible. Nobody could start 33 companies and have all 33 in a row fail. A person would give up by then; they would give up after the 10th company. They wouldn’t keep going. So, we got an incredible education as to what not to do as far as building a company. Because we saw all the mistakes 33 companies
made, and people didn’t understand that.

Paul Gray: Right. So that was the value that you were referencing then? That was why you were content, the fact that you got that learning experience?

Louis Spagnuolo: Yes.

Paul Gray: Interesting. Were you always like that?

Louis Spagnuolo: I always would try to look for the positive in things. Even when I threw my phone against the wall, I was trying to find the positive in it somehow, and we did this. And that really was another huge changing point in my life because I don’t know everything about what to do in business.

I don’t always have the right answer per se. But right now, I know exactly what not to do, which gives me a huge advantage because I’ve seen all the mistakes 33 companies have made. I’ve seen the mistakes I have made, so I know exactly what’s not going to work. Sometimes, there’s little latitude for guessing, and there’s circumstances I already control as far as what’s going to work. But half the equation I already eliminated. So, that gives me a huge competitive advantage whenever we do something new.

Paul Gray: It’s interesting you say that because most of the entrepreneurs that we speak to here have the same approach. They’re very optimistic in nature and they see every challenge as somewhat of an advantage to them that they could learn from.

But I’m also curious to ask you was after investing and founding so many different companies, what was the approach? Was it similar to the cell phone business where you saw a need, and then you went to go satisfy that need? Did it always work out that way? Or did you always have to pivot in some way, shape, or form?

Louis Spagnuolo: It was a combination. I was always an opportunist, and people knew that I had a reputation that I could make fast decisions and could wire money quickly. And that kind of became my reputation. So, people would come across deals and they’d be like, “listen, this guy has a problem.” He has his kids going to college. He has to pay the tuition. He has this asset. I think you can get it at a distressed price.”

And we’d start researching right away. We’d drop everything. And then, 20 minutes later, we’d have an offer. If he accepted, within the hour he’d have the money.

And I kind of got that reputation for investments. So, that was one of the ways we built the investment portfolio. And then the other way was if we ever ran into something and there was a problem, and it just didn’t make sense and was like, “this shouldn’t be a problem. This shouldn’t be that complicated.”

We would say, “this is an opportunity.” Because this is silly that with today’s technology, that we still have to deal with something so trivial like this. That we have to come up with a better way of doing it. And we used that whole thesis to come up with a lot of things. I remember years ago we were one of the first
people to do these iPhone apps.

People thought we were crazy with this iPhone app, and we did one for insurance. We did one for the private jet. Because I was realizing it’s taking way too long to do simple transactions. People should be able to do them right away. We already have the technology; we’re just not using it.

So, really, it’s a combination of finding opportunities and then finding problems that can be made more efficient.

Paul Gray: Got it. And then, I also have to ask you, during your time at RBC, it looks like you built a very impressive book of business. How did you go about building that book? What was your outbound? What was your inbound strategy?

Louis Spagnuolo: We built the office in RBC to the largest in the United States, that we were doing $2 billion a year. And right now, that doesn’t sound like a big number because numbers have gotten crazy. They’ve gotten astronomical where now we’re talking hundreds of billions, but back then $2 billion was a lot of money.

And I knew in that business, the key, I think, to scaling any company is the people. And I would always tell my HR people. I said, “the most important job in the whole company is number one: me.” I would always joke around and say, “me”, even though it wasn’t. And then I’d say, “number two is the HR person.” And the HR person was really the most important. It wasn’t me. I would say it as a joke for people to laugh.

I would tell the HR person, “you’re going to be the key to the success of the company. If you do a great job, the company’s going to do great. If you do a bad job, we’re going to go bankrupt. So, all the pressure’s on you.” Because that person’s the one that, basically, puts together the team.

And I would always instruct the HR person that, specifically, I want superstars. I want superstars. I don’t want you to hire average people. Because there’s a million average people. There’s a million nice people. There’s a million average people. We have an abundance of that, but I want superstars. And I’m not worried if we have to pay them more because I’d rather have one superstar versus three average people and just build it like that: superstar after superstar after superstar.

And that’s kind of how we did it. And we got the reputation for that. So, other big-time salespeople or producers from other companies, they wanted to be a part of it. Once the ball started rolling, they were like, “I want to be on the Lakers. I want to be on the Patriots, Super Bowls every year.”

I want to be on this team. This is where all the great players are playing. I want to be on this team. And then, once you get a bunch of great players, then all of a sudden you get pricing power. You’re doing so much volume that you can start dictating the terms to your suppliers and to your people saying, “no, we’re giving you all this volume, if you can’t get us to this price, we’re going to take all our business away.”

So, you get an incredible position of strength by that, but it all starts with the people. And it starts with focusing on people that are stars. I believe in the star system. And I’ve done that with every business.

Paul Gray: I love that. And Louis, I have to ask you, what separates a superstar from the average employee?

Louis Spagnuolo: The average employee gets to work at nine o’clock and leaves at five. The superstar wants to get a jump on everybody, wants to get there an hour early. They want to stay later. They take pride in it. They feel that they own part of the company. And I want the people to feel that way. They’re the guy that wants to come in on Saturday in the morning to make sure they got everything taken care of. They’re
the guy that, Sunday night at their house, they’re preparing for the week. The guy that wants to go the extra distance; the guy that wants to make more than the average salary. The guy that wants the most for their family, the best for their family.

That’s the guy that has that drive that wants more. Versus the person that’s like, “okay, these are my responsibilities. I’m going to make sure I do these, then I’m done.” Because that’s really 99% of the workforce, just being honest about it. Most people won’t talk about that, but 99% of the workforce is average. And then you have 1%, and that’s the superstars. And people have this saying that everyone’s replaceable. The president is replaceable; this person’s replaceable. And they always talk about people are replaceable. And I agree with that. I think anybody’s replaceable. I’m replaceable, you’re replaceable, but I look at it completely different. And I say, “we can replace this guy. But the question we have to ask ourselves is, ‘can we replicate this guy?’” That’s what’s important. Can we replicate what they’re doing? We know we can replace them. You can hire anybody else. That’s easy. But can you replicate what they do as far as their production, their work, their expertise, their experience?

And when you get someone that you can’t replicate, that person, you can never let them leave. So, we give them money. We give them bonuses. We give them whatever they want. Because in the long run, we’re always going to win.

Paul Gray: I see. I love that. And I have to ask you, because this is our core business, the Hedge Fund Symposium, what sparked that? How’d that get started?

Louis Spagnuolo: The Hedge Fund Symposium started as, again, another funny thing, because I’m in this group called Tiger21. Actually, I graduated from the group. I don’t do the meetings anymore, but I did this group, Tiger21. And we were investing in hedge funds. These hedge funds were going crazy at the time,
and we would invest sometimes as a group, sometimes as individuals. And the end of the year came, and one of the hedge funds we invested in was down. It lost, I think, like 6% or something. So, everybody was upset because hedge funds are supposed to do better than the market. And then, all of a sudden, in addition to losing 6%, we got this tax bill for like $80,000. And I was like, “wait a second. If I lose 6% on the stocks, that means I took a loss. Why do I have a tax bill of $80,000?” And then, I learned with hedge
funds is that just because they’re down in money, doesn’t mean you don’t owe taxes. Because they’re constantly trading the stocks, and there’s constant taxable events when they do that. So, I didn’t realize this.
So, I was like, “wow, that’s not such a good idea.” It really scared me. So then, someone came to me and goes, “well, there’s a solution, though.” And I’m like, “what’s the solution?” And he goes, “Private Placement Life Insurance - PPLI, and Private Placement and Variable Annuity.” And I was like, “well, tell me about that.”

And then, they started telling me about that, and I realized I’m like, “wow, this is the ideal way of doing it.” You could basically invest in hedge funds, and you don’t have to pay taxes. I’m like, “why is everyone not doing this?” So, I couldn’t understand why no one was doing it. And then, quickly, I realized the reason was that the insurance industry does a very bad job of marketing its products. And luckily, I’ve been able to take advantage of that on two occasions. I could tell you about them later. They come up with these products where they’re really technical names that no one understands, that the consumer can never understand. And nobody wants to sell it. So, we had these PPVA’s and PPLI’s, but there was no traction. There was no volume; no one wanted to do it.

And I was like, “ let’s try to get this going. Let’s try to get people interested in it.” Because if you’re running a hedge fund, you could basically defer all the taxes for the money you’re making. And then, you could also offer it to your clients. So, we put the Symposium on for a bunch of years. We got it going, but the truth is that we could never get the elite hedge funds to be a part of it because they can never really understand it. And they couldn’t really explain it to their customers. And I think the failure really sits on the insurance carriers because they have a great product that, really, a lot of people should be utilizing and very few do.

Paul Gray: I see. That’s interesting. And then, my last question for you, Louis, and a very important one is, tell me a little bit about Privatejet.com.

Louis Spagnuolo: Okay, PrivateJet.com was an example of an opportunity that came my way, where a gentleman was in a situation where he needed money. Someone called me, and they said, “listen, he has this intellectual property. It’s really interesting. I think you should talk to him. He needs some money. You
could probably get a good deal on it.”

So, I call him up, I talked to him, we hit it off. We’re going back and forth. He wanted a really huge amount of money. I was more comfortable with a less than huge amount of money. And we couldn’t come up with a deal. And we were going back and forth. And then, finally, one day in the summertime, I was going to a Marlins baseball game. And I’m at the baseball game, and out of nowhere I see his name pop up
on the cell phone. And I’m like, “I wonder why he is calling me.” And I was thinking, “should I take the call? Should I let it go to voicemail?”

And I was like, “alright, let me take the call.” And everyone’s going to get upset with me because I’m going to have to leave the seats. And they’re going to say, “where are you going?” And I have to deal with that, but let me just do it.

So, I get out of the seats. I go towards the concession area and answer the call. I talk to him, and he’s like, “listen, I have a situation that I want to take advantage of. If we could do a deal, I could do it at this number.” And we made the agreement. So, I ended up buying it. And when I bought it, I was like, “wow, this is an incredible piece of real estate.”

This is an incredible piece of intellectual property. But the problem was that I didn’t know anything about private jets, just like I didn’t know anything about cell phones and a lot of the other stuff we got involved in. But I said, “even though I don’t know anything about it, if I’m calling you, and I’m saying, ‘Hey, my name is David, or my name is John, and I’m calling from PrivateJet.com,’” I have instant credibility right off the bat with you.

Because you’re going to say to yourself, “PrivateJet.com, this has to be a serious guy. This has to be a serious company.” This isn’t like ‘Joe’s Famous Private Jet Charter’ or some silly, ridiculous name that a lot of companies take. So, I said, “this is going to give me a sustainable competitive advantage.”

And I like that. I think it’s important in business to have a competitive advantage. I see a lot of people now trying to compete, and they try to compete on an even playing field. And I think that’s too difficult. Even for myself, I don’t think I’m good enough to compete on an even playing field. So, I tell all my guys, unless we have a sustainable competitive advantage, it’s too difficult. There are too many things that could go wrong. There are too many unknowns. There are too many variables. It’s just too hard. Yeah, we might win because we’re good, and we’re experienced and have expertise. But we also might lose. Whereas I give everybody the poker analogy where I like starting my hand with two aces.

Now, I’m not going to win every time. You can still get beat with two aces, but you’re going to win a lot of hands if you have two aces every time. And anytime we go into a venture that’s what I like to do. I want to make sure that, before we go in, I have some niche where no one else has, that it gives me a huge advantage that we could keep going with.

And that’s how PrivateJet was born. Then, once I had it, I found people that are experts in the industry. We did partnerships; we did a magazine; we started doing charters; we were doing yacht parties. And it just took on a whole life of its own.

Paul Gray: Oh, wow. That’s incredible. Very nice. And Louis for anyone that wants to learn a little bit more about PrivateJet.com or wants to get in touch with you directly, how could they do so?

Louis Spagnuolo: I’d say it’s LinkedIn. The one thing I do have to say is, I, maybe, get 60 to 70 DM’s a day. I can’t answer all of them. I try to answer the ones where I feel I could add the most value to their questions because there’s just not enough time in the day. But typically, if someone DM’s me, and maybe if I see them a few times. And I see their persistent, then I usually always answer.

Paul Gray: Beautiful. I love that.