My guest today is Charbel Zreik, managing principal Manifestation Capital. In 2012 Charbel founded a search fund, purchased DCI (a hospitality-focused telecom company), successfully turned it around, scaled it to a national footprint and then sold it. He now advises entrepreneurs attempting to scale similar sized businesses. This is Part 1 of the interview where we explore Charbel’s career and path to CEO. Tomorrow we will talk about DCI and how he turned around and scaled the business.
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Transcript
Edward: My guest today is Charbel Zreik, Managing Principal of Manifestation Capital. Today we're going to cover Charbel’s career and path to CEO. Cornell, JP Morgan, McKinsey, Light Beam Capital, DCI. Charbel now coaches CEOs to help them scale their businesses while simultaneously growing spiritually. Charbel and I stayed in touch with the time at business school, more than a decade ago. I'm super excited to have this conversation.
Charbel, you had come from a finance background and then in 2012, you left McKinsey to form a search fund. You never really been an operator at all before. Your fund acquired DCI in 2014, and all of a sudden now you're a CEO without any real operating experience. I have a few questions for you on that. Number one is, how did you convince investors to give you money to run a business when you had never run a business before in your life?
Charbel: Can I just say it's great to be here with you today. I'm excited to do this together. There were a couple of parts to convincing the inventors. Part of it was selection. I went to investors that I knew were in the business of backing raw talent and not experience. That was really the first important step is to find this small insulated community of about 30 or 40 investors that I knew would be willing to take a bet on young entrepreneurs as a first time CEO. That was the first part.
The second part is walking in there, you had to convince them a couple of things. Sure, there were a couple of technical things, like you have to show that you could either close a deal or lead people. Those were the two things, and they'd be willing to take a bet on you if you could do one but not the other. Of course, having never closed a deal before I was really angling towards hey, I could lead people. I'd had some roles in the past.
Actually, one of the things that really resonated with this community was the fact that I had grown up running my brother’s moving business when I was younger and I had experience managing a blue-collar workforce. That’s what these investors fear—the smart, McKinsey Wharton grad coming in here but having no sense at all how to deal with normal day to day human beings. Having had that experience under my belt, it went a long way.
Edward: Your time at JP Morgan and McKinsey, how many direct reports would you have? How big was your biggest team that you're managing as an analyst and consultant?
Charbel: JP Morgan was small. There were like four or five people there. I was an associate at the bank that I was managing. At McKinsey, maybe the largest team I managed was 12 or 13 people including people that weren't direct reports to me, they were indirect reports. Again, 5-7 direct reports and a handful of indirect reports.
Edward: And in DCI, how big was your organization?
Charbel: When I sold it, I had about 150 people.
Edward: That's like an order of magnitude change. It's interesting, they cared so much about the experience you had when you were effectively 14 years old taking on this job, almost as much as they cared about the fact that you were a high paid McKinsey consultant.
Charbel: Yeah, I would say even more. I remember I was still working at McKinsey at the time, and I was going around meeting a bunch of these investors. I was like, wow, I haven't talked about this in decades. Why am I spending more time talking about my brother's little $2,000,000 moving company than I am talking about these global experiences at JP Morgan and McKinsey that I've had? They were sure enough to know that that's the stuff that mattered. And also, with those investors, you talked a lot about more fundamental things to who I was as a person.
I remember, when I was in Boston talking to definitely top three influential investors in that community. I remember distinctly being in this guy's office and he's looking through my private placement memorandum, and you can just tell he's kind of bored, he's not impressed, and we're nearing the end of our half-hour. And then as he's paging through he's like, hey, what's the hardest thing you've done kid?
I stop and think I'm like, screw it, I'm just going to be honest here. The hardest thing I've done is forgive my father after he left my mom. I remember Bill closed the PPM, pushed it aside, and he's like, tell me a little bit more about that. I've been talking to my son in law about that, tell me a little bit more about that. We spent a bunch of time talking about that. These guys were looking to see what kind of character you had shaped, what kind of growth you had deep down as a person as much as anything else.
Edward: I'm a big believer that the experiences you have when you’re 12–14 affect your entire life. I don't think I've ever seen it as directly as this. If you hadn't had that experience, if you hadn't been overseeing your brother's moving company when you're that age how do you think your life would have been different?
Charbel: I'm fascinated by the fact that you have that kind of philosophy and then how you chose 12–14. I've never heard someone choose that age as an inflection point. But what’s ironic, most of these stories that I just told you—my father left home when I was 14, and I ran my brother's moving company when I was 14. It’s amazing. They both happened at that age.
It's hard to say, man. In retrospect, it’s 2020. I'm very grateful for the path that I've had. I wouldn't want it any other way. But running that business put me through hell on so many different levels. It stretched me intellectually, emotionally, but just the sheer pressure because my brother went away every summer. He went back to Lebanon where we immigrated from, and he was gone. I was running the business for two and a half months.
I had about 15 employees at the time. I was dealing with all these highbrowed decorators—New York City French decorators who were decorating these high-end houses and then hiring us to move in the furniture. It was a lot of just weight on my shoulders at the time. I think that probably shaped me more than anything—having that kind of responsibility for the employees, responsibilities for the trucks and the furniture on a day to day basis. But I think just the weightiness of having to deal with those kinds of customers and delivering on the overall mission at such a young age.
Edward: Do you think you still would have gone to Cornell if you hadn't done it? Do you think you still would have worked at JP Morgan?
Charbel: Those two things, yes. I think yes. Would I have eventually owned my own company and run it? That part I'm not sure. Because seeing my brother do what he did built in me a fire of like, okay, this is culture gone—my brother did a phenomenal job building that company, but he was very what you would expect of an entrepreneur running a $2,000,000 business. He controlled a lot of the things in the business. He was very authoritarian in his managerial style. I saw that and it built a fire in me of, hey, can someone do this differently? Can there be a different culture of empowering people and unleashing the best in people?
JP Morgan, McKinsey—they're good places to learn certain elements of leadership, but you're generally a culture taker or not a cultural setter. That fire that was built within me in those early years at my brother's company, one, built the fire of wanting to come out and build a certain type of culture. But two, I had felt the weight of being an entrepreneur like that, which is a very different type of weight than trying to make the next promotion at McKinsey. It's a completely different kind of pressure.
Edward: You got these investors to trust you to go in and become a CEO of this business. After, again, having never run a thing or operated anything since you were 14 years old. How about yourself, were you worried? Did you have a concern about your ability to actually pull it off?
Charbel: Yeah, I was terrified. I remember being so terrified the week before we close the deal about running the company. I found myself starting to find different excuses not to do the deal until I finally named it. I'm like dude, you're terrified of going in and managing these people. It was a completely different group of people. These guys were not the McKinsey type, not big intellectuals. The six owners I was buying the company from were all like bodybuilders, all huge, 6’3’’, 250lb guys, and I was going in there to manage them and tell them what to do.
I was so terrified about this different type of environment where it didn't matter how smart you were. You were not getting respect for having a certain type of intellectual caliber. The brands were a detriment to me. They had hardly heard of Wharton, McKinsey, and JP Morgan. I had heard of them, it was a detriment to me that here's this pretty boy coming from these big brands thinking he knows what he's doing in IT and telecom. That's what made it particularly scary at the time.
Edward: What skills did you wish you had that you were missing?
Charbel: So many. But I would say, the one skill if I could pick any that I wish I had was knowing how to accept people exactly where they are without being judgmental of where they were on their developmental path and still show them the road ahead to developing further.
I came from a culture, especially at McKinsey, where people were very critical of who you are by design and we're giving you feedback left and right all day long. I mean, you were at McKinsey, you remember that culture. There's almost an innate sense of being critical in order to be great. Even clients at McKinsey, we went in being a little critical of and thinking that how could you possibly do it this way. I learned very quickly that the average person—at least in my experience in this business—feels more than they think their experience of you.
Being in their company, I can bite my tongue when I feel like being like, you idiot. I could bite my tongue and be like, that's not exactly how you should have done that. It didn't matter that I bit my tongue. If I felt it, they felt it. By the time the end of my tenure as a leader of that company came around, I had actually made a shift on that. It was the most difficult shift that I had to make as a leader. But core to that shift was this one skill, which is the skill of, no, really accept people where they are, lose the judgment about where they are as a professional, and then show them the path upwards.
Edward: That's incredible. At the time you spent at JP Morgan as a financial analyst, what skills have you developed there that actually did help, or was it almost all these soft things that came earlier?
Charbel: Look, my investors love me. In the boardroom, I was the man the whole time. I never wavered from being great in the boardroom. Those were the skills of JP Morgan and McKinsey. There was no strategic problem that I couldn't break down into the options, present the options, and present a confident recommendation for.
I never got too stuck in the weeds. I could drill down all the way to the bottom of the weeds and catch any nuance in the financials, and I can go all the way to the top and talk about the two or three most important things to the company. That's great. That was wonderful. It helped me a lot not to make any strategic errors, and it helped my investors feel extremely comfortable with me.
Those were good skills to have. They helped me upwards. They didn’t actually help me in being successful and running the company. They didn’t help me with my customers and my employees, which is ultimately the bulk of the equation when it comes to success in that business.
Edward: We're going to talk a lot about that tomorrow for our second part. I want to talk about your time at McKinsey. McKinsey’s a tough lifestyle. You're working a lot while you're there. Tell me a little bit about what you did when you were not working at McKinsey and how you made your personal life work?
Charbel: That was challenging. We travel. We get up at 4:30 AM, 5:00 AM Monday morning, fly to the client site, and come back at midnight on Thursday. That was really challenging. For me, I was lucky enough just as I entered McKinsey to have had exposure to the art of yoga. Right before I joined McKinsey, I had just come back from a yoga ashram in the Bahamas. Where I had gone first seeking just a place to go and tune out so I can make a decision about this long-term relationship that I was in.
My friend had promised me, hey, go there. It's a great place to tune out. I arrived and the next thing I know, I'm being awoken out of my tent. I pitched a tent on the beach. It’s a beautiful serene blue island in the Bahamas. The next thing I know, someone's ringing the bell in my ear at 5:30 AM in the morning, and I'm waking up and doing two hours of meditation and two hours of yoga. And then I had a few hours free, some workshops, some vegetarian meals, no alcohol, no caffeine. And then I would do another two hours of yoga, another two hours of meditation. That was supposed to be my retreat. Eventually, I got into the zone, and it did serve as a retreat.
That ended up being a really beautiful gift for me because it introduced me to yoga, introduced me to meditation. I think, every year—except a couple of years that I spent in Dubai—since then, let's see that's been 15 years ago. I think 12–13 of the last 15 years I've gone to that ashram every single year for somewhere between one and three weeks and tuned everything out including my board, including all my employees, and really dove back into that retreat.
That was very helpful for me at McKinsey. Not only going there, once a year obviously but also having my own yoga and meditation practice on a definitely weekly basis and a lot of it on a day to day basis
Edward: Obviously, you feel that the meditation work that you do has helped you immensely in your career and in your life. Can you put that into words to help someone who doesn't do that to explain a little bit about how it helps?
Charbel: That’s definitely the toughest question you've asked me today, Ed. There are so many different ways we can go at it. On a very basic level, it's basically taking a lot of the random noise and activity away from the mind. Our mind is a beautiful tool and could really be put to work in the service of some things. If we have a specific problem, we could put our mind to work in the service of that problem.
The challenge with our minds is they take a life of their own. If I asked you, hey Ed, what's going to be the next thought that you have? You're going to have a hard time answering me because a lot of times the next thought that we have isn't up to us. In that way, there's a lot of random activity, random thoughts that come and go in the mind. There's fear that's developed in the mind from millions of years of evolution that have left us negatively biased, where we’re vigilant and trying to manage fear and the downside of things.
The mind creates some self-chatter around that—managing the downside, trying to foresee something bad that might happen, and think it's way out of that situation. The practice of meditation really brings a lot of that to stillness and decreases the amount of that random activity so that rather than being at the whimsical winds of your mind, you’re a little bit more in the driver seat in terms of what you put your awareness, consciousness, and mindfulness directed to.
Edward: Charbel, what's the biggest failure point in your career? Where did things not go as expected?
Charbel: I would really say the first couple of years of running that company. I remember a juncture point—March 2016, I've been in the company a little bit under two years. The [...] was hitting the fan. I don't know if I can say that on this podcast or not, but the [...] was really hitting the fan. I mean, six or seven things were going wrong. My lead developer had developed a mental illness and had deleted our software program. I had fired the finance team for just being negative and having a cultural challenge.
The new product that we launched was going sideways, and all these hotels—their internet access was going offline. I had the CIO of Starwood on my phone being, what the heck are you doing? You’ve got to fix this. A lot of things were going sideways. A lot of it, honestly, comes back to the failure and leadership that I talked about earlier. It was about me not being able, to at the time, really put some senior leaders in place that could be fully empowered, whom I could fully trust, support, and work as a strong team with.
I had tried to control too much. I had been too negative with the people that had reported to me. I had been too critical rather than supportive and empowering of people, and that all came to a head in March 2016.
Edward: What did you take from there? What did you learn that you were able to eventually have a very successful exit with that company?
Charbel: I remember at that point of being maniacal about shifting my leadership style. I've hired a leadership coach at the time and I was like, you know what? I’m not exactly sure how I'm going to shift this, but I know exactly the points where I’m failing. I know that when I have these conversations, I go home at night, and I feel bad about myself. Because it was someone who had failed, and I had taken that failure on their part. I felt like they offended me somehow, personally, and that they let me down. As a result, I thought less of them.
We had a tough conversation, I was critical in that conversation. I could see the point of where this leadership style where the rubber was hitting the road. I just became maniacal about that. I was working with my leadership coach at the time. I made these little laminated cards of the shift that I wanted to make. I wanted to go from this to this kind of behavior.
At the time, my meditation practice was really in high gear, so I would use that as part of it. At the end of my medications every morning, every evening, I would take out my laminated card and really reinforce for myself the types of behaviors that I was going to have. At that point, I remember I was working on that shift, I also set out and I got approval from my board to hire three senior managers—a head of finance, a head of sales, and a head of operations. I said, hey I'm going to do it differently with these guys. I really honed in on my recruiting skills, as well as my leadership skills, and that's really what made the difference.
By September or November of that year, I'd hired three very talented individuals. From that point forward the shift started to happen in the company. Now other things happened too. We had a very good acquisition that we made that helped to accelerate a lot of the changes that we're trying to make. But that turning point first came internal with me about shifting my leadership style and then manifesting that by these three senior recruits that I brought in place to help me run the company.
Edward: Charbel, beyond just meditation, what are your productivity tricks? What do you do to be productive that most people don't do?
Charbel: I think that's such an important question, Ed because no matter what we're doing in life, there's only a certain amount of time that we have to put towards it. There's probably a couple of things that I do beyond meditation. I meditate every day, twice a day. That's really bread and butter to my centeredness and direction in life. But beyond that, I would point you to other things.
I'm a big believer that a year is just 52 weeks. If you’re going to do anything great this year, you better do something great this week because that's it. You just have 52 of these and that's your whole year. I really prioritize my weekly planning. I have my annual goals every year. Those translate to quarterly goals, and then every week I review my quarterly goals and say, what needs to happen this week in order for me to make sure that these quarterly goals are going to happen?
This weekly prioritization process—I'm really a big fan of, and there are other things that go along with that. Putting the big rocks first, the most important things first, and then letting the smaller pebbles in the jar, then the sand in the jar, and letting the smaller things fill in around the bigger things. But that whole process of weekly prioritization and weekly vision is really important for me.
The other thing is self-care. I feel like demanding everything that we demand of ourselves, it's so easy for the core asset of ourselves to be depleted. I'm a little bit anal about how I do self-care. When I was running my company—I'm no longer running it now—I had this very specific check in, check out rituals every day. Where I would literally get up and do my morning meditation routine, et cetera, and say, okay, now I am checking in my role as CEO.
Now I turn on my ringer. Now I actually take off my beaded necklace and I put on my gold necklace. I literally step into another role. Now I'm going to allow the thoughts that I get about the business, to stay in my mind and percolate because that's helpful. But when I check out at night, when I take off that gold necklace and put on the beaded necklace, when I turn off the ringer, when I do my second meditation, when I get any thoughts that come in, I'm going to write them down real quick on a notepad and leave them alone. Those check in, check out rituals were really important for me.
I also scheduled my workout throughout the week so I knew I was going to get them in along with my meditation sessions. That self-care routine is right up there next to my weekly vision and planning.
Edward: I just want to make a note to our listeners that you are wearing a beaded necklace as we do this podcast.
Charbel: I was afraid you would notice that I wasn't taking this podcast as such a serious professional endeavor. I've actually never worn that gold necklace since I sold that company. Now, my personal and professional life has just melded so much more.
Edward: We're going to pick this up tomorrow when we talk about the business itself. Thanks, Charbel.
Interview: Charbel Zreik, managing principal Manifestation Capital, Part 1