Newsletter King Porter Stansberry on his journey turning a $36k investment into a $3 billion IPO

Porter Stansberry founded Stansberry Research with a laptop and $36k of financing from Bill Bonner.

(You can meet Porter in person at the June 14-15th www.FinancialMarketingSummit.com)

He and his partner, Steve Sjuggerud, and the team they built, turned that 36k into a $3 billion valuation at their IPO.

That initial money was to fund what would become one of the most successful promotions in the history of financial publishing.

In this conversation, I wanted to dig into the pivotal decisions Porter made along that journey to $3 billion.

What decisions did he make that really MATTERED?

And how were those decisions different than the decision other publisher's made along the way.

He did not disappoint.

We touch on how he got Bill to fund his now legendary direct mail promotion, "There's a new railroad across America," that launched his business.

Porter tells the story about how not long before that breakthrough another publisher had told him he would never make it in this business.

And what he realized about the quality problem in the early investment newsletter business said about some of his colleague's world views.

Porter's full presentation at The Financial Marketing Summit on his 8 Keys to Breakthrough Customer Value is available in the members area of The FMS PRO Community

FinPub Pro is produced by The Financial Marketing Summit, the #1 networking and marketing conference for financial newsletter publishers, trader educators, and digital financial media.

John Newtson, host and founder of The Financial Marketing Summit can be reached via LinkedIn at John Newtson

Transcript

John Newtson: 0:03

All right, everyone. It's John again from FMS. I'm really excited today because we have with us Porter Stansberry, who, for most of you who've been in the industry Porter doesn't need an introduction, but for those of you who may be a little bit new to the industry, Porter is the only person I know, who I think. He took what Jeff like 36K and a laptop and basically grew it to a $3 billion value.

Porter Stansberry: 0:24

Overnight success 22 years later.

John Newtson: 0:28

But also, I think, like and just for everyone, like Port is, he's coming to FMS, he's going to be talking about how he's managed to build a business that has what 3X the lifetime value of a customer compared to pretty much everyone else in the industry. But when we were talking and I realized, like I have a whole lot of questions about a lot of things besides simply the publishing side, and so we decided to do this, have this conversation, which is, you know, I think everybody's been following other people in the industry and I think of you as the person that most people actually have followed and that other people are following them in terms of what they've done in the business, and then other people are following them in terms of what they've done in the business. I remember when I came in the business Stansberry Research was, I think, the largest Agora group at the time and everyone was following what you guys were doing. And then, even over the years, other groups put up larger gross numbers. You guys were still taking home more actual money than everybody else.

John Newtson: 1:21

And so I was talking to a friend named Pete Monson, who's a financial copywriter. He's worked around, you know, for quite a while in the industry and he was saying you know, it always seems like Porter's been working from a different roadmap than anyone else and I was like that seemed really appropriate, not just on the publishing side but on the business side. And so, porter, that's kind of what we want to talk about today is the business decisions you've made from the beginning that are kind of pivotal in building a company from startup to a $3 billion IPO, and you would know better than I where that would start.

Porter Stansberry: 2:00

Well, I think it's interesting that they thought I was on a different roadmap because I really was. Well, I think it's interesting that they thought I was on a different roadmap because I really was my original business partner and I his name is Steve Sugarwood and he wrote the True Wealth newsletter for many years, still does and he and I looked at the newsletter business back in the mid-1990s, 95, 96. And at the time Steve was running a global mutual fund and I was just getting out of college, so I knew nothing about the financial newsletters or about the financial publishing industry as opposed to investment banks and brokerage firms. And Steve basically said look, there's two ways of doing business. You can be regulated and be a broker, or you can be unregulated and be a newsletter writer. And being a newsletter writer is way more scalable. You don't have to deal with clients one-on-one, you don't have to be a fiduciary. If you have good investment ideas and you can write, then you can be successful as a newsletter writer and not just as an individual broker. And I didn't really care, I just wanted to be involved in finance. I love the challenge of capital allocation, I love the research process, I love the incredible differences in business models, and I still do.

Porter Stansberry: 3:14

You know, the reason why McDonald's has been a great investment for 40 years isn't because their food isn't any good, it's not. It's because they are a royalty business, right. They don't even really own restaurants. Yes, technically they own, they own they own maybe 25% of their locations but their whole business is is getting people to buy franchises, and they get 7 cents on the dollar every time you buy a Coke. That's a hell of a business. I mean, they're a marketer and a brander. They're not really a restaurateur, and so if you understand that, then you're way more likely to invest in McDonald's and you would have done very well if you had.

Porter Stansberry: 3:47

But my point is just that so much in finance isn't what it looks to be from the outside, and that was always my fascination and that's what I wanted to be involved in, and I didn't really care whether it was as an analyst at a hedge fund or writing a newsletter, and I don't know that. That is very true. I don't know if that passion for finance is the same thing and a lot of the online marketers and copywriters that I have met. I think they're more interested in marketing and they're more interested in advertising than I was, and I think if you actually read the copy that I have written and you, you look at the different things I've done on the front end and the back end, the one thing that unites them all is that they're all poorly written. I'm a complete hack, but the financial ideas are very deep and I just thought if we could have better ideas we would probably win, and so that's what we tried to do, and I don't think that was the same as a lot of other publishers. The other thing that I think that really set us apart was I figured out really early on that there was a quantum difference between a really good financial writer and the average financial writer.

Porter Stansberry: 4:57

And when I say really good, I'm talking about a guy like, for example, david Lashman. I hired him out of the University of Florida. He was a medical researcher at Florida. He studied the history of virology, which is a really niche space. But he's kind of like a Mensa member kind of mind. He's extremely smart and he's done a lot of bench science in his time, and for the last 20 years I've paid him to go to every major medical conference and get to know every important scientist and read every important paper. So when he writes a report about a biotech new product, it's written at a level and with a density that nobody else can compete with in the financial newsletter space. There isn't another person like that in the world, much less in financial newsletters.

Porter Stansberry: 5:47

Well, to keep him, I had to pay him a bloody fortune because he could go to work at any hedge fund. He'd go to work at any investment bank tomorrow, but he wants the freedom and he likes to be his own boss. So it's a good relationship that we have. But I had to be able to pay him a lot or I wouldn't have been able to get him or keep him. And that was really tough because most financial publishers frankly, they pay people peanuts and as a result, they end up with a lot of monkeys on their staff.

Porter Stansberry: 6:13

And if you're going to write about something as complex as modern biotech, you really have to know what you're doing or you're just selling schlock. And if you're selling schlock, that becomes really apparent really quickly and you can't you can't get the prices for the products that we had. So my model was yeah, I got to pay a guy like David Lashman five times or 10 times more than most people in this industry make for being a financial newsletter writer, but in the marketplace he's worth a hundred times more, and so I was. I always thought that was the bigger fatter margin and that would lead to the larger lifetime values and the higher prices for products. So we're able to sell our lifetime product now for $35,000, which, when we started into this, that was just completely implausible. No one ever thought that would be possible. But I knew that if we had enough talent and if the content was actually worth it, we could get the price. And we did, and so that's what I've always tried to do Go out.

Porter Stansberry: 7:10

If you're going to have a product, go find the guy who's the best in the world at it, recruit him and then build the business. And so for a guy with like, for example, with empire financial, I wanted Whitney Tilson. Whitney Tilson had started writing about stocks in the 1990s. He had a very successful hedge fund he's been on 60 Minutes three times. Like he is credibility and when he got out of his hedge fund business, the two places he was likely to go work were either Stansberry or Motley Fool, and so I'd been recruiting him since 2003-2004.

Porter Stansberry: 7:43

And I sent him lots of you know good information on stocks. I'd helped him him since 2003, 2004. And I sent him lots of good information on stocks. I'd helped him. It helped him with his hedge fund. So he knew me and he was willing to come over and we started in 2017. And that business now, empire is probably worth $100 million now, and so those timelines and those recruiting takes a long time, takes a lot of capital, but it does work, and so that's just what we did. We didn't launch products until we had the right analyst, and we insisted on having somebody that we could completely and fully believe in.

John Newtson: 8:17

So let me parse that out a little bit, because I feel like when we say things like the quality of the product, the editor, and you talk about passion, about financial markets, a lot of people in our space gloss that over. They're just like yeah, yeah, yeah, we have that. Or I have a guy who he has this minor level of experience. Often, or in some cases, there are people who never had any experience and they were just going to kind of just figure stuff out as they go because they figure they needed somebody to fill a product hole.

John Newtson: 8:50

The focus on, like, quality of editor and actually putting somebody who's actually went out there on the ground and involved in the industry that they're in, like I feel like that is completely overlooked almost across the board by most people. A lot of publishers will take somebody who's like well, they used to be this, they used to be at a hedge fund and now they want to write, but now they're not really involved in the markets anymore. They're not going to conferences, they're not out there actively, it's not a living business for them. It's like I have some experience, I'm going to write about what I did, you know, 30 years ago and you know when I find something on Yahoo Finance, I'm going to write it up that quality and that active pursuit of quality, I think. So you have somebody who's really amazing at understanding a sector, but you're you're talking about putting them on the ground continually, over and over again, throughout the business. They're not just like I was really good before and now I sit at home, don't do anything but right.

Porter Stansberry: 9:53

You know, it just depends. You can definitely do well with a guy who was a senior person and is now, you know, partially retired. But I would just tell you, as a publisher, your most important employee is not your head of marketing or your head copywriter. Your most important employee is the managing editor. And if the managing editor has the budget and the mandate and the chops to do a great job, you can definitely build great products. And the first question the managing editor should ask every editor when he's assigning a, you know, a monthly newsletter or any kind of project, is you know who? Who are you going to speak to about this? You know, and if you're not going to do five or six interviews, then don't bother taking the assignment. And I think that's one of the biggest things that most people getting into the business really screw up is man, if I talk to two people, just two people and I have two 20-minute phone calls with two people who are in the industry and who really know what's going on, that saves me 100 hours of online research. And sure I've got to go read the 10K, I've got to read the 10Q. Obviously I have to do that before I can have those interviews, but the context that comes with those discussions is irreplaceable and you can't find it online. So if you are getting started and you don't have a pedigree and you don't know where to go to get somebody who does, and you can't afford to spend a million dollars a year on an editor, then you just got to get really good at working the phones. And that goes for copywriters too. If you're writing copy about an investment trend, how many people did you talk to about the copy? And if the answer is less than 10, you haven't done your job and your copy is going to suck compared to somebody who's made those phone calls and has all those little actualities, those little, those little you know, family stories, all the stuff that really adds the textual credibility that makes it believable and makes it really memorable. And if you don't have that stuff, then you haven't done a good job writing. And let me just say one more thing about this the more people that you talk to, the more you're going to learn and the more you're going to know.

Porter Stansberry: 11:58

And one of the most important things that Stansberry Research ever did was identify in 2009 that the Eagle Ford and the Permian Basin and the Marcellus Shale, among others, were going to transform the oil industry globally. And that was a time when most publishers were still selling peak oil running out of oil. The other publishers said peak oil running out of oil. The other publisher said Meanwhile Stansberry Research was saying we're going to go from producing 5 million barrels of oil in the United States out of all sources to producing 15 million barrels a day just in Texas and that's going to happen in the next 10 years. And of course it has. And the changes that that has brought to our economy and to that industry are incomparable. And so we would have never known about that.

Porter Stansberry: 12:47

That wasn't on the Internet. You know what was on the Internet was peak oil. But of course we had. We had deep industry contacts. We had a professional geologist who had spent 10 years in the industry working for us and, believe it or not, my best contact in Texas is a guy named Cactus Schroeder whose family has been in the oil business for, you know, for three generations and he literally knows every single person in Dallas and it's in the oil business. And so you don't make those contacts, you don't get that kind of information unless you're out there talking to people and you're not going to be able to talk to people if you don't have products that are good and respectable and so that's just it all. It's not one thing you do. It's a constant evolution and a constant improvement, and unless you have that dedication to the editorial, it's going to be very difficult for you to get good prices for your products because, frankly, they're not worth anything.

John Newtson: 13:41

Yeah, I think that's again. It's so nice to hear you say that. Just because most people in our space could name a copywriter from a bunch of different businesses, they could name the managing editor or even, often, cases the editors themselves. The marketers and the copywriters are kind of the ones who everyone looks to because, like you said, everyone's obsessed with that part of the business.

John Newtson: 14:05

When you look at the talent side of this, one of the things that I think that you've done better than most other groups is retain talent, and that's editorial talent, but that is also your marketing and other people that you kind of stars that you have on the team. So, like, what have you done differently in that space? Like, how do you whether it was the recruiting piece, like you said these long-term relationships like that speaks to me personally, because I see this with myself, that there are just relationships that it takes years. You know this is a good person, you have a good dynamic, this is a star. Like, over the course of several years, maybe you keep trying to do things where it's just the timing's not right, but then eventually the time hits and you can work together. What else have you done?

Porter Stansberry: 14:54

You know, superstars, don't jump ship.

Porter Stansberry: 14:57

You know, they're very hard to recruit but they stick around. So I started recruiting Michael Palmer in 1996. In 1996, he finally came to work for me in 2002. And when he came to work for me at the end of 2002, he told me, porter, I'm only going to work for it for a year. I really like being freelance and I'm a good copywriter and I can work for all publishers. I don't have to work just for you. And I said, mike, if you give me a year I'll be flattered and of course you know whatever you want to do.

Porter Stansberry: 15:27

And then it was really simple. It wasn't just pay. Of course I paid him more than anybody else would, that's fine. But it wasn't just pay, it was I gave him more tools and ammunition to get the job done, to get the job done. So, man, it's a lot easier to be a copywriter when you actually have really good editors to work with, with really good ideas, and when the editors are all pulling together as a team. So Mike doesn't have to write the whole package, he just has to write the headline and the lead and then he's going to have two or three assistant people who help him with the body copy and the editors are handling all the premiums and we work together as a team and everybody gets paid as a team. You know, it's interesting to me that the industry figured out real quickly how to pay people as a team to do something like a webinar, because it takes a lot of coordination the editors, the marketers, the technical staff and the copywriters. People still haven't figured out how to do that. On the front-end packages, well, we write front-end packages in two weeks and the only way that happens in two weeks and the only way that happens if you have a good copywriter and you have good editors and you have good assistant editors and you have good lawyers, and of course, it also helps when you're actually writing stuff that's real and meaningful and novel.

Porter Stansberry: 16:35

You know, it's not, it's not um anyways, but my whole point is if you want to attract, if you're, if you're trying to attract the Yankees, you know you can't have a triple A dugout. You got to have a bunch of other stars for the Yankees to work with, and so the compensation structure is a big part of it, of course, but man, people like to work with the best, and so among the things that I did that was different was when I realized so this is a concept. I call it gravity. And here's the thing If you get three or four superstars together, working together, what they can accomplish is unparalleled. One star, you got to have a group, and that group creates this gravity that attracts everybody else. So you're going to get the best marketers. You're going to get the best customer service people. You're going to get the best sales people, because they want to work with Steve Sugar, mike Palmer and David Lashman, and I've got them. And then an interesting thing happens If you start letting C players into the universe, you'll lose your A players. The company culture will change.

Porter Stansberry: 17:46

Now I probably shouldn't tell this story because I probably violated some employment rule, but I walked into my office. This is a long time ago. This is 10 years ago roughly. I walked into my office one day, actually more than 10 years ago, and I just didn't like the people I saw walking down the halls. You know we were probably at 100 employees, maybe 120 employees by that point.

Porter Stansberry: 18:05

And when I say I didn't like the people walking down my halls, I wouldn't have wanted to be friends with them. If I had gotten stuck at an airport with them for five hours. I would have been miserable because they didn't have anything interesting to say. They weren't the kind of people who read books, they were the kind of people that watched television. They just weren't for us. They shouldn't have been working in a research organization, they shouldn't be involved in creative activities, because they were duds.

Porter Stansberry: 18:27

And one of these duds this is a true story. I don't want to say if it was a man or a woman, because it doesn't matter but they built basically a bunker of canned food on their desk. So they had like a bunch of Chef Boyardee cans of food around their workspace and let's just say they weren't in the best physical condition and I was like, man, nobody wants to come in and watch an obese person eat Chef Boyardee out of a can at their desk. This is just not. This is not helping our recruiting or our culture. And so I figured out this is a true story.

Porter Stansberry: 19:04

I figured out that there was one person in our organization who had hired 12 or 14 duds and I was like, ah, that's the cancer that needs to be cut out. And so I had him and all 14 people come to a meeting and I fired all of them in one meeting and they all had a nice check in front of them I said all you got to do is sign a piece of paper that says we can be friends and I won't disparage you and you won't disparage me and we can all go on our way and have a new start. And you guys definitely need a new start because you're not going to succeed here. This isn't the right environment for you. And so they are all shocked and chagrined and, you know, signed their checks and were getting ready to leave and a guy knocks on the door of the meeting and opens the door and goes Porter, hi, nice to meet you.

Porter Stansberry: 19:50

I'm Joe Smith. I'm new here. Today's my first day, and everyone in my group got called into this meeting and I thought maybe you wanted me here too, but you just didn't know to invite me because it's my first day. And I was like Joe who hired you and he pointed to the guy who was the source of all these problems and I said oh, yeah, definitely, come on in. You're fired, oh, poor guy.

John Newtson: 20:20

But you know, this person.

Porter Stansberry: 20:22

This person was hiring people who just didn't measure up. He just he wasn't going to work in our group and what you needed to, what you needed to be successful in our group, was you had to have a relatively quick mind. So I told people at a meeting recently that if you didn't make a 1400 on the SAT, I wasn't going to hire you. Now I don't mean that literally. You know, if you, if you got a perfect score in the English and you weren't that good at math, you'll probably be fine or vice versa.

Porter Stansberry: 20:46

But like you got to have a, really you got to have a passion for intellectual growth and for intellectual challenge, or you're not going to get along with any of your peers. So hiring really smart people was sort of the number one thing. And then the number two thing was I really liked it if you had a background in competitive team sports. So if you were a college lacrosse player or you were a college football player or you were a woman's soccer player, you know I didn't really care what your passion was, but it was way more fun to be around people who were passionate about their, about their lives, you know, not just their careers and I just, I wanted to be inspired by the people that I was working with. I didn't want to have to do all the inspiration myself, and that was that was a big, that was a definitely a big difference. We were a very, very competitive bunch.

John Newtson: 21:31

That's fascinating. I remember when I first came into copywriting years ago and I don't I haven't written copy in years because we kind of moved with the conference into other businesses but there was a list that I got from Clayton Makepeace when I worked with him, from you actually. It was a list of books that every copywriter should read and 100% of them were finance books. They were not like Gene Schwartz or copywriting books. It was like no intelligent investor. It was like you had to actually understand financial concepts in history in the market to be able to write in that space.

John Newtson: 22:07

And since then I've seen nobody say or do anything that suggests that they think that that's the case, at least not in recent years, and that to me, I guess speaks to me about the culture you're kind of talking about. You have an actual mind for the industry. You have a passion for markets, because finance, when you look at it, it's one of the most fascinating areas in the world, or subjects in the world, because one is so broad. It intersects with business politics, there's the economy, there's investing, there's skill, there's all these different things. It's like this fascinating kind of central hub of how the world works. And so if someone's not passionate about that. It seems like they probably shouldn't be writing for products in that space yeah, I agree with you.

Porter Stansberry: 22:55

I also just think that I mean I was just shocked at the at the really poor level of basic financial knowledge amongst virtually all the marketers or copywriters that I met in the industry when I got into it. It was just shocking to me that they didn't truly they didn't know the difference between a penny stock and an actual business. They didn't know the difference and I mean I was just blown away by that. I mean I just blown away. I mean I remember this is a true story. I remember a publisher at Agora was writing a penny stock package and he was claiming that stocks like Intel were penny stocks. Because he was looking at historical prices and he didn't understand the impact of stock splits going backwards. So you know, there was never a time that Intel actually traded for 13 cents. That's not the actual nominal price, that's the current price after you know a dozen stock splits in reverse. And he had no idea of that and as a result, his work was just embarrassing. I mean it was nonsensical.

Porter Stansberry: 24:05

Of course it still worked in the mail, you know, because the people he's writing to didn't know any better either, right, but I would just been embarrassed to be associated with that kind of publication. I mean that's just bad right. And so if you're, you know, if you're a marketer or a copywriter and you say, I don't care what the damn editorial says, it matters that the response rate is, well, look, that's certainly one way of doing business and I'm not going to be overly critical of it. It just wasn't for me, and I don't think that you can be very successful doing that for long, because you might start just by shining on your clients, but eventually, if that's your mindset, you end up shining yourself on too, and that leads to a catastrophe, yeah, and it's going to have a knock on effects with recruiting talent later.

John Newtson: 24:51

Who knows what's going on with partnership potential, with regulators, with all kinds of people, absolutely.

Porter Stansberry: 24:58

And that business, by the way, it collapsed spectacularly, you know about 18 months later and caused them a lot, of, a lot of problems. So it's just, it's just, I don't know how. You know, it's a very competitive space and I don't know what you're thinking. If you, if you think you're going to be really successful and you and you don't, and you haven't even read those books. And I remember that list there's probably 20 books on the list and like that's the stuff that every first year finance student would have read. Like it's not, that wasn't those. Those things were easy to read. We're not talking about the black Scholes theory of options, pricing or something, something that's pretty complicated, you know. Or I'm just saying like, uh, it really. It's like, think about if you're trying to open a restaurant, you didn't know how to cook an egg. Like you know, you're the owner of the restaurant. You may not be the person cooking eggs, but you sure as hell better know how they're cooked.

John Newtson: 25:48

Yeah, or how can you basic level of knowledge that's needed.

Porter Stansberry: 25:51

Yeah, so that's always. That's always struck me as as as as interesting. But yeah, I, I, uh no-transcript legend.

John Newtson: 26:26

maybe that when you first started coming into the industry, there was somebody who fired you and said that you would never be successful as a newsletter publisher? Is that true?

Porter Stansberry: 26:36

That's very true. Yeah, I don't want to use his name cause I don't want any more litigation. There was a. There was a very senior publisher at Agora, the most senior publisher at Agora at the time, and he and I had a very terrible personality conflict, in part because I'm not a very good employee. I didn't mind in a meeting telling him flat out that he was dead wrong about anything and I figured, as long as I was right, then I would be okay. No, if you embarrass your boss repeatedly in meetings you will get fired, and I certainly was fired. I was fired the first week in January 1999. And he told me when he fired me that I was the least entrepreneurial person he'd ever met. And then I was sure to be a failure and I thought that was a little gratuitous. But you know, one of us went on to become a billionaire publisher and one of us was out of the industry and a couple of years later Fair enough.

John Newtson: 27:34

I think that says it. So you started with kind of the the full Agora mothership behind you and then over the years you've move Stansberry, and then Legacy and the other business units that became MarketWise away from the Agora mothership. Why did you decide to do that and what was the impact of that? Because it seems to me that you started with one business that was tied to Agora and then, as you moved away, you ended up building your own ecosystem of companies that became more substantial now, I think, or close to as substantial as the Agora ecosystem itself.

Porter Stansberry: 28:14

Yeah, that's a very interesting story and I don't think that I've ever told it publicly anywhere and I don't have any reason not to. But we don't normally talk about the things the way. We don't want to talk about things that are structured, but I'm happy to. But what really happened was because I had been fired from Agora when I wrote what we call the railroad package, which was the first direct mail package I ever wrote, and the headline across America there's a new railroad across America is making some people very rich, me included.

Porter Stansberry: 28:47

I didn't say that, but um, it did. You know, there was a railroad package and it was a story that talked about the historical significance of the new fiber optic networks and the way that they would change the world in commerce, the way that railroads had, and it was a new way of understanding um, this technological boom. That really helped people who were older and who weren't familiar with computers get why it was important. It's hard to believe this, but back in 1999, there was an argument being made that none of this, this, that the internet was just a fad and it wouldn't. You know, it was no more important than a fax machine. And so you know, explaining why that wasn't exactly the case was important and the package really caught traction and you know, at the time it was the best selling thing that had ever happened in the financial newsletter space we made. This is back when you had to pay for stamps and postage and printing. We still made 800% ROI on those mailings. I mean, we were mailing the phone book. It was an amazing takeoff.

Porter Stansberry: 29:45

Well, the interesting thing was I did all that before I was out of gore. I did all that from my kitchen table. And so I sent that package to Bill Bonner, who is the principal at Agora, and I said, hey, I think this will work and you've always been really good to me, and he has been, and it's not your fault that this other guy fired me. And if you want this package, I'll sell it to you for 50 grand, which I thought was, you know, would have been the highest price that I'd ever seen some paper package. And I didn't think it was likely that Bill would pay me. But I thought it'd be a good place to start the negotiation and I said I'll give you 24 hours on an, exclusively, but if you don't buy it from me, then I'm going to send it to your biggest competitor, which at the time was Phillips Publishing, and I knew Tom Phillips from Social Connections, and so I kind of put Bill in a little bit of a bind there and he said well, I don't know about the price, but I'll definitely buy it from you. Let's talk with some people and figure out a way to get you back into the fold and just trust me, we'll work something out. And I did trust him because Bill is the most honorable person I've ever met in my life.

Porter Stansberry: 30:50

In fact, we ran Stansberry Holdings, which became MarketWise, from 2014 until 2019 on a handshake. We didn't have a contract of any kind or an operating agreement. Yeah, and by that point it was a you know 300, $400 million a year in sales business. But dealing with Bill is no problem because he completely is good for his word. And so he said, hey, we'll work something out. And I was like, okay, and so it ended up. He never paid me for the package in cash. Instead, he agreed to finance the marketing of it, which he did to the tune of 36 grand. And then so we had sold the public Porter Stansberry's investment advisory. But Bill didn't have a contract with Porter Stansberry and didn't really even own the package because he had never bought the copyright from me. And so we struck a deal where I was going to get 25% of the equity of the business and he was going to put up all the money and a lot of the backend stuff.

Porter Stansberry: 31:50

You know I didn't have. I didn't have a legal department. Obviously. I didn't have customer service, I didn't. So I thought that was a really good deal for me and I think at the time it was a really good deal and we went forward, but of course, we never papered anything. We just had an agreement, and so over time, that agreement changed and Bill gave up more and more of the equity to different employees, as I, as I kind of demanded and and then.

Porter Stansberry: 32:17

So what happened was then in 2014,. Really, we needed to. We had gotten to a size where we just had to paper everything, and so we we moved completely off of Agora Systems and we set up a different, we recapitalized and set up a whole different legal structure to own the companies and we gave all the employees real equity. But it took us five years to get all that work done because we were so far behind the eight ball in papering everything, and so that schism in 2014 was in part a legal matter, but it was also in part a cultural and structural matter.

Porter Stansberry: 32:53

We had really what Stansberry Holdings was doing was really different than what Agora was doing at the time, and Agora more and more copied our model.

Porter Stansberry: 33:02

But we were really focused on lifetime value and we innovated this thing called the alliance offer, which is where you pay a certain price and you get all of our products, including all the products we build in the future and we really pioneered that whole model because I just figured lifetime value was the thing to keep investing in, not just more marketing, and that really worked well for us. That really influences the culture of the company too, because everyone in the organization understands that what's important is not just the next new promo but instead the fulfillment process, the renewal process, the upselling process, the onboarding and everything else that goes along with it. That process because we were treating customers sort of differently than a lot of their brands were and we were, but we still shared some database stuff. So like their customer number would be the same at Stansberry Research as it was at Zagora Financial and that was really confusing and hard to explain. So by really separating everything completely, it was helpful for us in building out our own real unique brand and style.

John Newtson: 34:12

That makes sense. That's great. I appreciate you sharing that. So as you did start to bring on different business units then I know at some points I'm not sure exactly what year that was you brought Mark in. I met him when he was I think he was the head of biz dev at the time and then he became the eventual CEO. And you described to me in the previous conversation that you know he's kind of the outside CEO and you're kind of the inside CEO. Could you kind of like what's that dynamic work and why did you kind of evolve into that model?

Porter Stansberry: 34:42

Yeah, just to be clear, I'm no longer at MarketWise, I'm no longer the outside CEO. I resigned and retired in December of 2020. And now Mark Arnold is both the chairman and the CEO. But the way I kind of saw Mark's role was you're exactly right, he started out helping us roll up some of the companies that we liked in the industry and improving their operations, and those M&A processes were unbelievable home runs. So if you have a good list and if you have a good lifetime relationship with your customers, you can introduce them to lots of new products and they'll keep buying, and that's what really drove those M&A processes. So we had Mark doing that and as a result, he was just sort of working a lot more outside the business, meaning he was going out to the conferences to meet other publishers. He was more involved in that outside process. It was also just his background as a deal lawyer for a venture capital law firm. That's just what he understood that part of the business and structuring things.

Porter Stansberry: 35:50

Meanwhile, sort of my job was to teach the new, the new people who are joining our company, about our culture and about our writing techniques and about you know what we wanted to see editorially and in our copy, and sometimes it meant introducing people to direct response for the very first time, because some of the companies we bought had never done that kind of marketing before. So in some cases I had to get people to be more aggressive and in some cases I had to get people to be less aggressive. I just spent a lot of time talking to people about what our style and tone was and what we wanted to see and the way we thought that we could make the businesses work better, and so that's just how it functioned. I just kept my hands in the content and Mark basically handled the the business and the deal-making side of things, and then my title was chairman and his was CEO, but really we ran the company together.

Porter Stansberry: 36:42

In fact, I'll tell you something very interesting about Stansberry holdings. We were a pro, we were a private company and we had, as a private company, we had a board and we had five members on the board. Two of them were from Agora, two of them were from Stansberry Holdings and I was the chairman of the tie breaking vote, so I had a central control of the business anything that was significant or material, without everyone's approval. So anytime we did an acquisition, anytime we established some new pay structure or anything important, we all had to agree that it was a good idea and for a long time. That was very frustrating to some folks who wanted us to be able to change faster, do more or whatever their you know, whatever their little pet project was.

Porter Stansberry: 37:26

But I actually think that was a fantastic idea. It kept us from doing things too fast and in many cases it saved us a ton of heartache and a lot of trouble. And so if you're involved in a private business that gets to any size or gets to any scale, and you can do that informally, if you have that, hopefully you have that kind of relationship with your other owners, your other partners. I really think that works the best.

John Newtson: 38:03

So, whatever you're going to do an acquisition or buying a new building, whatever it is, whatever is a big decision, everyone's got to agree it's the right decision. Wow. So when you look back, though, like on building this business, what do you think? So I know we're going to set the lifetime value discussion aside, because you're really going to focus out in depth at FMS, and you know we've gone through several things. What do you think were the like? If you had to name, like the three to five most pivotal kind of decisions you've made, what would you be in your top three Like?

Porter Stansberry: 38:28

definitely. You know, I think the most important decision was how we decided to treat our employees. You know, I just I just knew that I wasn't going to get anywhere in business without a lot of help. And so when I recruited Mike Palmer, one of the things I did that I think most people will think was kind of crazy is I said hey, listen, I'm probably going to end up writing a lot of the copy with you and I don't want this to ever be a problem, so I'm never going to take a royalty.

Porter Stansberry: 38:57

And most copywriters would be like, ooh, you gave up a lot of income. Yeah, I did. And then you know I had I had I had deals with my partners that I would get management bonuses based on the net income of the total group, and I just knew that that was great for me, but it wasn't going to lead to growth for the business. So over time I gave up all those bonuses in order to recruit other people and to make sure that the company was successful. And so when I left I don't know if this is still the case or not, but when I left the company, 10% of the net income every year went directly to employees and bonuses.

John Newtson: 39:35

that's a very large amount of money, that's fascinating because I've heard other people from other large publishers like, who didn't have, um, any type of real stake in anything, who ended up leaving over time um and um. I know in one case in particular, there was a you know kind of an argument was actually, you guys were used as an example of like look, look what porter did for palmer and these other guys and, um, like, why would you do the same for your, the team that helped build this company? And the response was uh, you know, you're making enough money, it's fine.

Porter Stansberry: 40:12

Yeah Well, I think it's just a different philosophy, Just a very different philosophy. I knew that I wouldn't be able to get rich unless a lot of other people got got rich too.

Porter Stansberry: 40:24

So just so one thing was the way, the way that I, the way that I thought of employees and the way that I wanted partners. And then, secondly, you know it seems obvious, but we just always put the customer first, and I know that sounds really obvious, but we really truly put the customer first. So like, in every way, anytime there was an issue, we would just make sure the customer won. So like, if you're going to roll a product, what should you give them? Instead, give them whatever they want. What if it costs more Doesn't make any difference. Give them whatever they want.

Porter Stansberry: 41:01

You know, are we going to own stocks? Are we going to trade stocks while writing about them? Hell, no, why not? Well, because we want to put the customer first. Well, that means we're not going to make as much money. So be it. Like we're not going to do that.

Porter Stansberry: 41:15

I can't manage all those conflicts and it just doesn't make sense to the customer, so don't do it. You know, are we going to invest in a lot of customer service people? Are they going to be college educated? Are we going to put them in our building? Are we going to treat them like actual coworkers? Yeah, we are. Why? Because that's what's best for the customer. Oh, you're going to spend a fortune on it? Yeah, but that's an investment in the customer, we'll get the money back. So you know, really really treating your employees really well and generously and then treating them and then, of course, doing everything you can to treat, to put the customer first, and then, I guess, the other.

Porter Stansberry: 41:47

The other thing is going to sound again kind of obvious in retrospect, but wasn't at the time at all. It's just I always shied away from doing anything at a very low cost. You know, if you, if you discount your products, you're going to get a lower quality customer. And I didn't. It's not that I. It's not that I don't think that those businesses can work well.

Porter Stansberry: 42:09

I just always thought, you know that I bet, I bet Louis Vuitton makes a lot more money than Kmart. Not sure if that's the case, but I bet they do. And I definitely want to be in the Louis Vuitton business, not the Kmart business, because the Kmart business is just a shit show and I don't want to be a part of it. So we just tried to price our products very aggressively, even though the marketers would tell me all the time you're going to have more subscribers if you price it less and I'm kind of like, well, maybe, but they're going to be the wrong kind of subscribers and what I'm, the business I want to be in as a lifetime value business, not in the, not in running the marketing hamster trail business.

John Newtson: 42:44

Right, you kind of get. You get the customers you asked for.

Porter Stansberry: 42:47

Yeah, and you're going to get the. You're going to get the employees that you asked for too, and so those are just the sort of the two things that I really think made a big difference. It allowed us to get good people, keep good people, both as employees and customers.

John Newtson: 43:01

It makes a lot of sense. It seems like I know, with internet marketing and financial marketing and digital, like copyright and all of it the there's, it's an easy thing for a lot of entrepreneurs to get distracted with what's the new marketing thing, and it's a constant thing, and what strikes me about what you guys have done is really like this mastering and focus on fundamentals, um, which is something that's so ignored. I feel like across the board, blocking and tackling.

Porter Stansberry: 43:32

Yeah yeah, it's awfully hard to beat a football team who's got the best line and can get four yards of carry. They win a lot of football games. It might not look great, but they usually win.

John Newtson: 43:49

Fair enough. So the I want to move a little bit to your decision on why you decided to do this back, why you decided to go public. I feel I feel like I've heard rumors about that like desire to go public for years before you guys did it. I don't know if that's just me misremembering or not, but it seemed like it was something that you really focused on, obviously. And then when you did it, it was, you know, we it's almost like a watershed moment in the industry and I think it made a huge splash. Obviously. Why did you decide to do that? And you know what's your experience with that. Would you do it again?

Porter Stansberry: 44:30

Yeah, well, you know I told you that from the beginning. Steve and I are really fascinated with finance. Steve and I are really fascinated with finance, and his experience as a money manager and a broker had taught him that a lot of the regulation is actually bad for the customer. It's nonsensical, and so we thought that by getting into this unregulated space we could build a better product. That would be better for the customer, and I'm convinced it is. If you look at the track record of any of our model portfolios, they're world-class.

Porter Stansberry: 44:58

And instead of having to pay us a percent or two of your assets, you paid a one-time fee, and maybe three or four years ago, a lot of brokers started doing the same thing. They said look, if you want to just pay us $1,000 a year, you can. I mean, I don't know exactly what the pricing was, but I know they started offering flat fee financial services. And that was my question why in the world do I have to pay a percentage of my assets to use your service? When I go to a hotel, they don't say, mr Stansberry, how much money is in your wallet or your luggage? Give us a percent of that. You stay at our hotel. No, they say, our hotel costs X, okay, so why would you buy financial services in this other bizarro way? It didn't make any sense.

Porter Stansberry: 45:40

The other thing that I always resented was that the wealth management industry always claims that they're going to make their clients wealthier. Trust me, that's not the way it works. The wealth management industry exists by siphoning wealth from their clients into their own pockets, and I liked being able to write about that and liked having a business model that was the opposite of that. I just think it's more ethical and certainly more fun. And so the main reason why we wanted to go public was because we think and this is still true that there is room for us to compete with every financial service provider, not just other publishers, and so we've designed our products and we've hired the right people to do things that other. You know that other wealth management companies do, from a fiduciary standpoint, that we think we can do very successfully from a publishing standpoint, and to get there, you have to actually behave like a fiduciary, which we always have. We don't buy the stocks we write about. We put the customer first. They can always have their money back X, y, z, and, of course, the products are pretty good, and so to do that, the number one thing I thought we needed to do to get there was we needed to have a product that was similar to a Bloomberg terminal that would allow people to interface with us in a format that was more similar to other financial service providers. Right, you don't interface with interactive brokers by getting something in your email. You interface by going onto a website or an app and using their services. So I wanted to create that, and doing that was going to be expensive, especially all the technological backend stuff that we had to do to do that. So we have that problem. It is competitive, I think, with other similar things from Bloomberg and other people.

Porter Stansberry: 47:22

And then the other issue was that we found that we were pretty good at M&A. We were pretty good at buying companies, improving their products and processes and merging them, but to do that requires a lot of capital. So we were looking at one acquisition which I'm not going to name because I know it's still in play, you know and we needed probably $300 million to buy them. And you're like, well, that's a lot of money. Well, not really not to a company that's doing $300 million a year in revenue. Right, you could afford it.

Porter Stansberry: 47:48

But we couldn't find a bank to give us a loan because we weren't public, and you know just all of things that go along with that. You just cannot. You cannot do business at that scale, um, unless you're, unless you're public, unless you have audited financial statements, unless you see stuff. So we just, it was just the next stage in our growth. You just it's awfully hard to have a billion dollar a year in sales business that isn't public.

Porter Stansberry: 48:13

Very difficult, I'm not saying it can't be done, it just very difficult. And then, of course, there's other factors. We have partners, some of whom wanted liquidity for estate planning and family planning reasons, like Bill, who's much older than we are, and so there's a raft of things. The other thing I always wanted one last point is we would make our customers promises like we don't buy the stocks we write about. But how do they know we were really telling the truth? And I, you say that an sec filing, you better be telling the truth. So we, I thought that that transparency would help us and give us an advantage over our competitors as well.

John Newtson: 48:50

That's fascinating, okay, um, so now you're. You, like you said, you retired from uh, from market wise, and you started. You're starting something, started something new. What?

Porter Stansberry: 49:00

are you doing? Well, it's called Porter Company and this is our offices. Behind me. I'm starting a much smaller company I don't ever want to have more than maybe a dozen people and I want to pursue just kind of a niche business where we have really great, highly specialized financial research products and there's just a couple of spaces that having the right information makes an enormous difference in performance. And that's property and casualty insurance, which is one of these black box businesses that outside investors really can't understand, where we have really good longstanding connections and sources of information, and biotech, which of course requires a whole lot of scientific knowledge, and those are really high margin products that don't require a lot of staff. They just require the right staff.

Porter Stansberry: 49:49

Another example is distressed corporate bonds, a very niche product in finance but one that's very, very lucrative.

Porter Stansberry: 49:55

I think that if you look at our previous product called Credit Opportunities, you find that annualized results are above 20% and 85% of those trades are wins, and that's really hard to do in finance if you're doing it for real.

Porter Stansberry: 50:11

I don't mean the typical newsletter track record system, I mean real dollar returns. So there's things that I just know how to do in finance, that most people don't know how to do and I don't think I need a company of 600 people to do them. And you know, after 22 years I was kind of worn out with managing 600 people and and managing the expectations of a lot of partners and having all that responsibility. So, going forward, I just want to have a very small group that does a couple of things really well and I'm not going to really be competitive with market-wise I'm still a major shareholder there. None of my products will sell for less than $1,000 a year, so they're not going to be mainstream products. It's just going to be people who know me and know my work, who are family office investors or brokers with a big client base.

John Newtson: 51:02

I think that piece right. There is something that people don't realize in the publishing space, which is that if you have the quality of product that you're talking about, it's not just the mom and pop retail investor who's buying them.

Porter Stansberry: 51:17

Oh no, not at all. Yeah, Every hedge fund in the world reads my work.

John Newtson: 51:22

Yeah, yeah, and I think I think that's something that people don't think about that the business itself is. There's a lot of different customer segments and publishing media. I think this is one of the this. I've been preaching this for a while that one of the bigger trends in the industry as a whole is that all areas of finance are really kind of coming on the table. All areas of investor are available as customers to the right types of businesses.

Porter Stansberry: 51:52

It's so funny. I can't tell you how many times I have seen my work plagiarized at conferences, and almost always, almost always, by people who are very critical of us.

John Newtson: 52:02

Yes, just terrible.

Porter Stansberry: 52:04

Okay, it's like the Howard Stern thing I'm sure you remember from from Howard Stern's movie. You know this marketing manager came to him and said Howard, we've got a big problem. You know, 75% of the people in New York radio market hate you. Oh geez, that's terrible. Well, the good news is the people that hate you listen twice as long as the people who I sure hate that Stansberry guy. Where's his latest letter?

John Newtson: 52:29

Yeah, that's great. Well, I appreciate you taking the time today and talking with me about this stuff, because I'm infinitely fascinated by kind of what you guys have done and the industry, and so I think a lot of our people are too, and so we're really excited to have you join us for the Financial Marketing Summit in, I guess, a month and a half.

Porter Stansberry: 52:52

Great, yeah, and I want to pitch that, if you don't mind, just for one second. Yeah, because I would love to. There are eight. This is the copywriter to me right.

Porter Stansberry: 52:59

There are actually eight definitive steps that can lead your organization to lifetime values that are two or three times what they are now, and some of them are obvious that we discussed, but some of them aren't obvious and, uh, I I have a pretty good track record of doing that and I will give you my actual playbook at your conference, and I do appreciate being invited and I do appreciate what you have done for our industry. I think that the more that we share best practices, the more credibility the industry as a whole can have and, of course, the more success people can have in the business, and that's the thought that I would leave you with. I can't tell you how many times in my career marketers and copywriters actually said to me don't give me a really good idea, because those don't sell.

Porter Stansberry: 53:48

That's just not true. You just don't know how to sell them. Let me show you. And so I just think that there has been in the past this mindset that you know, quote unquote you know, good finance or complicated finance can't be sold to the public, and that just isn't true. I mean me and Steve Sugarwood.

Porter Stansberry: 54:08

We had a package that was called Portfolio Repair. It came out in 2002, right after the bear market of 2001, 2002. And it was about mortgage REITs. Now, mortgage REITs are a real subset of finance. They're a real complex specialty and you cannot explain to the average newsletter buyer what the hell a mortgage REIT is. But we didn't explain it that way. We explained it as government-backed portfolio repair, which it is. And so you know it's just it's. It's it's learning how to do that stuff that I think can really make a big difference in your results. If you can start with good finance and then you take the time to put it in everyday language, you'll be way more successful than if you just make a bunch of empty promises and you don't have a very good financial product.

John Newtson: 54:53

Yeah, and just to kind of like put the cherry on top for everyone who's listening on the LTV conversation, the lifetime value conversation you're going to have at the summit. Like, what do those numbers look like just comparatively?

Porter Stansberry: 55:06

Yeah, well, I can tell you that when I left MarketWise in December of 2020, the average lifetime value the average lifetime value of a converted customer, and what that means is someone who bought anything besides one thing. So we're not counting the people who came in and bought, you know, one $5 book and never bought anything else again. Not counting that, calling anyone who bought more than one thing from us. So you came in and you bought a $5 book and then you had a renewal, or you bought another product, or then that's a customer. So anyone who bought at least two things from us as a converted customer, and the average lifetime value when I left was twenty eight hundred dollars. Um, I'm sure now it's well over three thousand and that's on hundreds of thousands of customers yeah, that's on, uh, approximately four hundred thousand people, so you can do that math.

John Newtson: 55:58

Yeah, and that's very high for, like I've seen, like in a very niche, tiny like day trading spaces where they might have a higher customer value because you have essentially 20 customers you can get, but they're going to pay a lot and to have a scaled business and have that kind of numbers. That's dramatically higher than anybody else I've seen in the space, dramatically higher.

Porter Stansberry: 56:25

Yep, and we're not there yet, but I do believe that getting to a lifetime value of over $10,000 at scale meaning at least 100,000 people is certainly possible with the right kind of financial products, and that's what I'm aiming to do at Porter Company. So we'll see if it can be done.

John Newtson: 56:39

That sounds amazing. So again, thank you, porter. I'm aiming to do at Porter and Company, so we'll see if we can be done. That sounds amazing. So again, thank you, porter. I'm looking forward to seeing you in person in Orlando, and so I really appreciate you taking the time today. This was amazing for me and, I think, everyone else is going to really enjoy it.

Porter Stansberry: 56:52

Well, I'll see you in June All right. All right, bye-bye.

John Newtson: 56:55

Take care Bye.