Mike Brown

Be the aggregator: buy what the big fish ignore, package it, sell it up

Mike Brown's whole business is arbitrage by aggregation: buy small oil and gas mineral properties too small for private equity funds to bother with, bundle them into a package, then sell the package to the 'big fish'.

“I started a company that buys oil and gas properties and packages them up to private equity-backed funds. So basically I'm an aggregator. I buy smaller properties that the big fish aren't looking at, put them together in a package, and then sell them to the big fish.”

Steal thisFind an asset class where buyers want scale but supply is fragmented; aggregate the small lots nobody else will chase and sell the bundle up the chain.

Horizontal drilling made the Midland Basin bigger than Saudi Arabia's fields

Brown focused on the Midland Basin inside the Permian. He says the advent of horizontal drilling unlocked massive new deposits, creating the biggest oil deposit in the world, bigger than the fields in Saudi Arabia.

“with kind of the advent of new technology, you know, horizontal drilling basically opened up massive new deposits, creating basically the biggest oil deposit in the world, bigger than the fields in Saudi Arabia. So we stayed in the heart of the heart and, and just decided to niche down to the very best properties in that area and go after those.”

Bootstrap by flipping: line up the buyer before you fund the acquisition

Brown and his partner never raised money. They'd agree to buy a property, then call around to find a buyer for that same property, and use the buyer's money to fund the acquisition, essentially flipping it.

“Basically what we would do is go out and find a property that we want to acquire, come to an agreement with the seller, and then start making calls to find a buyer for that same property. Right. And then use basically other people's money to fund the acquisition.”

Steal thisSecure the exit buyer before you close the purchase so you never tie up your own capital.

Two founders broke 7 figures in revenue before hiring anyone

The company started as just Brown and his Navy buddy Jay. They crossed seven figures in revenue with only the two of them, and peaked at just five employees total.

“it started just Jay and I, and we actually broke 7 figures in revenue with just the two of us. And then a couple of years in, we're actually so busy, we're like, maybe we should hire an assistant like that can actually go check the mail and pay our bills and do the things that we were still doing. So at our, at our peak, we had 5 employees was, was the most that we had.”

Chase asymmetric returns, not more deals

Brown's core operating principle: 20 mediocre deals are worth less than one deal with huge upside. He filtered out the chaff and worked smart instead of hard, since hustling harder wouldn't find better deals.

“Finding 20 deals that were mediocre were not as good as finding one deal that had a tremendous upside. So I quickly learned the power of focusing on the highest possible upside that I could find and basically trying to filter out the chaff and really focusing on working smart instead of working hard.”

Steal thisDefine the few metrics that signal a great deal, apply them ruthlessly, and pass on everything mediocre instead of grinding for volume.

Down to $2,000 in the bank, the first deal ever saved the company

Six months in with a new baby, a new house, and $2,000 in checking, Brown hadn't closed a single deal. The life-changing first deal closed right at the wire.

“In May of 2013, and we had this idea that, you know, we're going to be successful immediately. We've got the playbook, like we're ready to go, we're going to hit the ground running. And in November of that same year, heading into Thanksgiving, I've got a brand new 1-year-old child, just bought a house, and I've got $2,000 in my checking account. And I'm like, oh, this is getting a little nerve-wracking.”

Sell concentration risk: turn one roulette number into the whole board

Brown's pitch to individual landowners: as a single owner you bear concentration risk, waiting for a driller to hit your specific tract. Selling to a fund spread across hundreds of properties is like trading one roulette number for a bet on every number.

“when you're an individual landowner in this area, you have a tremendous amount of concentration risk, meaning you have to wait until the oil company comes and drills on your specific piece of property. That may be now, that may be in 20 years. We believe it's actually better for individuals to sell their properties to funds that are spread across hundreds of properties and have actually risk analysis based on how their ownership looks. So it's like playing roulette, essentially. Either you can put all your money on one number or you can sell it to a fund who can then spread their money over every number so that they win every single time.”

Steal thisFrame your offer as de-risking the seller, not just buying their asset.

They lost the deed to a 7-figure property bought with the bank's money

Brown's worst deal: a million-dollar property's deed was sent to the county courthouse to record ownership and vanished. They had nothing to show for a 7-figure purchase made with bank money, and had to go to the seller hat in hand.

“We lost the deed to a 7-figure property that we had purchased, by the way, with not our money, the bank's money. Right. And we had absolutely nothing to show for it. So we had to call the guy hat in hand and essentially explain what happened. And it could have gotten really ugly if he had decided not to work with us.”

Steal thisRequire signed receipts for any document that transfers ownership.

Take the 8-figure exit: 'how much is enough?' beats growth for growth's sake

Brown had an 8-figure exit and believes he could have hit a 9-figure exit by working 80-hour weeks and hiring 25 people, but deliberately chose lifestyle over maximal scale.

“we had an 8-figure exit. Certainly probably could have had a 9-figure exit if I worked 80 hours a week and, you know, hired 25 employees to do this thing, but that's just not something I ever really desired to do. I wanted to, uh, create a company that could provide abundance for me and my family and, um, the people that I chose to spend it with. But, you know, kind of this, this massive drive to see how big I could grow it just for the for the sake of, of growth never really made sense to me.”

Steal thisDecide your 'enough' number before you scale, and stop optimizing for growth once your lifestyle is funded.

Intense positive peer pressure: embarrassing the squadron is the only sin

Brown imported a fighter-squadron culture principle into his company. New members are mentored, not torn down, but the worst possible thing isn't embarrassing yourself, it's embarrassing the group, so everyone checks on everyone.

“And the ultimate sin is not embarrassing yourself, it's actually embarrassing the squadron. So if you were to go to, you know, a joint exercise and show up for a brief unprepared, that would be embarrassing to the squadron. That's the worst possible thing you could do. So, so it's everyone's kind of, again, it's not, it's not negativity based. It's very positive. Like we're all trying to lift each other up, but you're going to go check on your buddy and make sure he knows his stuff because if he embarrasses the squadron, that's on you.”

Steal thisMake the team collectively accountable for each member's output so peers police quality, not just managers.

Every policy is written in blood, and never make an unimportant rule

Borrowing from the Navy's NATOPS manual ('written in blood' because procedures follow deaths), Brown teaches the why behind every policy and refuses to make arbitrary rules, so employees never have to guess which rules matter.

“They say NATOPS is written in blood, meaning if there's a procedure in there, it's probably because somebody died and then they changed the law, you know, the way to operate. And so we kind of brought that same idea to our company saying, hey, all of these things are here for a reason. If you want to understand that reason, we'll tell you what we did and what we screwed up, basically. That made that policy a thing.”

Steal thisExplain the origin story behind every rule, and refuse to create any rule that doesn't matter.

The basketball rule for handling mistakes

Brown's heuristic for tolerating errors: miss a shot and you still get the ball next time; miss again and you probably won't. A first mistake is fine, a repeated one means you may not belong in the organization.

“hey, if we're, if we're playing basketball and I pass you the ball and you take the shot and you miss, the next time we dribble down the court, I'm gonna still pass you the ball. If you shoot again and miss, you're probably not gonna get the ball next time, right? So, so it's not that we want to come down on somebody for making a mistake, but if you start making the same mistake over and over, that's gonna be a problem and you're probably not gonna be someone we want in the organization.”

Steal thisForgive the first mistake freely; treat the repeated one as the real signal.

You only get 1-2 productive hours a day, so protect them

Brown argues you can stretch your real work into 8 hours of coffee runs and water-cooler trips, or take care of yourself with exercise and meditation and then go hyper-focused for 1-2 hours and produce more.

“ultimately, science is starting to show that people can only really have 1 or 2 real productive hours in the day. And so So you can stretch that out into 8 hours and go up to the water cooler and go get coffee and a donut, you know, and get up from your desk 10 times a day. Or you can go take care of yourself, practice self-care, you know, meditation, exercise, and then go get really focused for 1 to 2 hours and knock out way more than you would be able to if you weren't taking care of yourself.”

Steal thisBuild your day around defending 1-2 hours of deep focus, and spend the rest on recovery.

Spend on time, not on ROI: the only non-renewable resource

Brown doesn't evaluate a $20K entrepreneur-group membership by dollar return; he asks how much it improves his quality of life, treating time as the only non-renewable resource and money as a renewable tool.

“And that becomes looking at how am I going to use my time, which is the only non-renewable resource. So when I look at the price tag on some of these entrepreneur groups, which is your original question, it's not what return am I going to get on my dollars. You know, if I put $1 in, am I going to get $3 back? I don't really give a shit. What I'm looking at is how does this increase the overall quality of my life?”

Steal thisJudge discretionary spend by quality-of-life and time bought, not by dollar-for-dollar ROI.