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Coffee shops should have a separate line for those of us who just want black coffee.

On the US acquiring Greenland… every single major land acquisition the US has made was controversial at the time but ended up being a generational master stroke. Louisiana Purchase Florida California+SW Alaska Hard to imagine the US without any of those today.

The faster you move past the spreadsheet phase of your career, the faster you will encounter major success.

Good book on Game Theory. Under the radar. Highly Recommend.

Seems like we can all delete our openclaw agents now... Fun while it lasted.

Discovered Stripe Press last week…

Highly recommend reading this book if you lead people. Claire was the COO of Stripe who designed their internal org- policies, protocols, etc. It’s a longer read but can also be used as a reference. Also recommend her appearance in the Tim Ferris podcast (episode 724).

Here are a bunch of my thoughts on private equity. They won’t be popular. That’s fine. I have been in investment banking or private equity for nearly 20 years, working with and for private equity firms. I’ve interviewed, met with, and interacted with hundreds of PE firms over the years. I’ve worked with good firms and bad firms, good people and bad people. I’ve seen what works and what doesn’t. So that’s my background, but I’m still just one guy with incomplete information, biases, and all the other baggage that comes with being human. Take it with a grain of salt. When I started in the space, private equity felt entrepreneurial. We called them “shops” (maybe that was just us?). They were hungry. They took risks. Success was not guaranteed. I started my career excited about the prospect of joining, buying, fixing, growing, and selling companies. Since then the space has changed. That’s natural in any industry. But PE has become commoditized. A systematic career ladder. People don’t join PE because they love businesses or because they want to innovate. They join because it’s one of the safest, highest-paid tracks in America. If you make it into the system- the right schools, the right banks, the right funds, you’re set. Worst case, you fail and go do something else in finance. Best case, you become a Managing Director (MD) and make generational money. That is not risk-taking. That’s joining a protected class. The industry has been drifting. There are more firms than ever, more funds than ever, and more Patagonia vests being sold than ever before. Profits attract competition. That’s not new. What used to be exciting and entrepreneurial is now systematic. And people inside it are deeply defensive of this system. They don’t want change. Why would they? The system is working for them. It’s the rest of us who are just not appreciating how much value they actually create! (PE is not exactly known for its humility.) But the system is good if you can get inside. Use other people’s money, take out debt, charge fees, and enjoy preferential tax treatment. Still, there are signs of cracking - more recently, returns mimicking the S&P500 and longer hold periods are increasingly normal. Continuation funds are more common. But the point is the system is asymmetric to the benefit of the private equity firms, the GPs. Private equity general partners make money whether their investors do or not and sadly, whether they improve the companies they buy or not. How? Fees. Fees on capital raised, management fees levied on the companies, transaction fees, reimbursements, etc. Keep in mind, these fees are disconnected from performance. Management fees are based on capital raised or charged to the companies for the pleasure of their ownership. On top of that, there can be other fees- transaction fees, deal fees, reimbursements, etc. So right out of the gate, the firm is making money, whether they perform or not. And when private equity does perform, they take a meaningful chunk of that value too. The classic 2&20 structure means they take a 2% fee on the capital raised and 20% of the earnings above a certain threshold (carried interest). All together, ChatGPT reports private equity GPs collect 30-40% of the total economic value of any given deal (it actually caveats that it may be more like 40-50%). Carried interest is designed to align incentives. It is payment for the firm's labor - not return on their own investment. The partners at a private equity firm may invest their own capital, but that is not what we’re talking about here. I’m just sharing the typical take home resulting from the structure. Lucrative. On top of capturing a huge chunk of the economic value, believe it or not, much of the take home pay actually gets preferential tax treatment. Carried interest is taxed at capital gains tax rates, not ordinary income. But that makes sense since PE labor is creating real value, unlike teachers, plumbers, engineers, police officers, salesmen, warehouse workers, bakers, pastors, waitresses, lawncare workers, doctors, nurses, dog trainers, construction workers… you get the point. To be fair, you can’t blame private equity for this - it’s the tax law. They’re just capitalizing on an opportunity, but again, it’s asymmetric. Depending on the year, the private equity partner might pay a lower tax rate than the warehouse worker in the company his firm owns. It’s the Warren Buffett/secretary example. Private equity’s job is to generate returns. That is the job for which they labor. And yet their labor gets taxed at 15–20%, while your labor gets taxed at 25–37% plus state? It just begs the question… why in the world are we subsidizing the labor of private equity? Keep in mind, they’re not deploying their own capital. They’re not the ones who have the capital (they’re just in the process of collecting it). They’re not the ones who run the business. PE buys companies with other people’s money. They charge management fees to the company they own. And when they sell, they collect carried interest taxed as capital gains-not ordinary income like the rest of us. But they don’t just buy companies with other people’s money - they also use debt. Glorious, non-recourse, printed-from-thin-air debt. This debt creates risk. Obviously. But if the PE firm drives a company into the ground, they can walk away. Move on to the next deal with no obligation. Employees lose jobs. Customers lose a supplier. Banks lose their money. But the PE firm keeps their fees. They move on to the next deal. Again, asymmetric potential losses relative to the potential gain. Meanwhile, the small business owning pharmacist who takes out an SBA loan to build his own business has to personally guarantee his loan. If the business goes under, he’s making payments until the bank is whole. A student making an investment in education, with hopes of earning a living (future returns) is stuck with his loan too, even post bankruptcy! So the pharmacist and student have to pay back their loans, but a private equity bro can load a company with debt, run it into the ground, and walk away scot-free? Make it make sense. (By the way, when new debt is issued, money is created out of thin air. This dilutes the power of your dollar- but that’s a topic for another day.) Inside portfolio companies, the dynamic is just as distorted. MDs suggest ideas. Everyone scrambles. FP&A burns weeks. CEOs chase ideas they know are dumb because saying no is dangerous. CFOs burn out. Operators are neutered. I used to think the people in seats before me, who I replaced, were weak. Losers. Why did this guy make this decision? Do things this way? Now I realize they were just beaten down, neutered by spreadsheets and initiatives. They were playing to survive, trying to hang on until their company sold. But PE folks are mostly people who have never run a business, much less worked inside one. They know debt, models, covenants, and exit multiples. And now their spreadsheets impact the most intimate parts of your daily life. They’re buying everything: Dentists. ENT practices. Veterinary clinics. Auto shops. Gyms. Valve distributors. Engineering firms. Healthcare groups. Fast casual chains. Your lunch. Your teeth. Your cancer treatment. Do you really want spreadsheet-driven finance firms deciding how much time your dentist spends with you? Or which treatment plan your oncologist uses? Or where the meat on your sandwich is from? These are finance guys with spreadsheets. Again, these are people who have never been in a business much less run one, and you think that they have the tools and skill set and judgment and moral compass to drive businesses that impact not just your day-to-day life like where you have a sandwich, but your actual health? Your lifespan? Do you expect to live longer with private equity backed healthcare? Take Jersey Mike’s. What do you expect now that PE owns it? Higher quality meats? Better trained employees? No. You expect: prices to go up, quality to erode, employees to become less friendly, the store to be less clean, etc. That’s not innovation. That’s a transfer of wealth from customers and workers to shareholders. And that’s a core problem with private equity - there is no innovation. There’s no risk taking. How can you when you are going to sell as soon as you can? (but not before three years - gotta get that cap gains treatment ;)) Hopefully we’re wrong and we all love Jersey Mike’s even more in a few years but the point is - that’s not your expectation when you hear PE bought your favorite restaurant. No one is excited when they hear private equity bought their favorite business. That tells you a lot. Operationally, private equity often claims to take a long term view but when you know you’re going to sell in just a few years, that’s just not what happens in practice. When you are thinking of selling your home, do you replace the roof? Nah, you just replace the shingles, put a bucket in the attic and hope the next buyer doesn’t notice too much. That may be an extreme example, but it does happen. Regardless of whether that’s the norm or the exception, it’s impossible to be truly long-term oriented when the incentives are to maximize short-term gain. Truth is, PE is optimizing for 3-7 years time horizons, not a 20-year competitive advantage. There is no vision setting, no ideating ten years down the road, no innovation. There are just hard, cold initiatives designed to “optimize” and drive the profits higher. What would I change? Despite the above, I think private equity investing can be a force for good. Like I said, I’ve seen great firms, great deals, and great people. It can be done well. PE would do well to recognize how others perceive them, address the criticisms, and adjust. You see some attempts at that lately (e.g., KKR’s employee equity program being emphasized and advertised), but PE is just not great at admitting mistakes. They seem (to me) to be in an especially defensive, insecure posture. That may be because returns have diminished, holds are longer, and continuation funds have risen in prominence. But there’s more to adjust than just perception. Longer holds would help. Making firms stand behind the debt they use would help (at least require them to pay back the mgmt fees they’ve collected when a company defaults). Transparently connecting fees to performance would help. Ending preferential tax treatment for carry would help. Forcing PE bros to actually work inside operating businesses they control would help. I think the industry is heading for a bifurcation. The mega-funds will keep getting bigger. They’re powerful and political and will dominate fundraising. At the other end, lower-middle-market firms will keep creating real value by taking small businesses to the next level. The middle will get squeezed. You already see it… middle market firms selling stakes in themselves to the big guys (just another PE deal). The real bottleneck going forward won’t be capital or deals. It will be operators. Financial engineering has been competed away. Sourcing has been automated. Spreadsheets can be done with AI (or will be soon). What actually creates value now is people who know how to run, fix, and grow businesses. That’s a good thing, I think. The emphasis isn’t even really on operators so much as it’s on creating real value. Maybe PE bros need to lose the deal sleds for boots and become operators themselves… Which raises an uncomfortable question for private equity: if great managers will create more value in the future, why do they keep giving most of the economics to spreadsheet people? I think for PE’s next chapter, you will see some corrections, and I think those will be great. I think time horizon will be forced longer. You’ll see fewer 3–5 year windows and more 5–7. I hope that goes to 7–10; maybe it will. For my money, the lower middle market is the place to be for the foreseeable future in the PE ecosystem. There, it’s genuinely helpful to equip companies with new tools, sophistication, and access to capital that they may or may not have ever been exposed to. “Launching” these smaller businesses to the next level is valuable to all of us so long as it doesn’t end up in the never-ending cycle of selling from PE firm to PE firm to continuation fund and so on… Despite the dour assessment, private equity isn’t evil. It’s just a tool, a strategy. Or it’s supposed to be. There are always good and bad firms, good and bad people and so on. Good ones exist for sure. But that is just not the dominant flavor anymore. The GP captures upside through fees and carry while transferring downside to LPs, lenders, workers, and the state. This is a structural free option. Private equity is the only industry where you can lose other people’s money, fire workers, default on debt and still become personally richer. It has generated a commoditized wealth-extraction machine that increasingly shapes society without accountability. And I don’t think anyone wants to live in a society run by spreadsheet aristocrats.

I once presented a billionaire some of the highest-ROI projects I'd ever found. Some north of 1,000% IRR. I have never forgotten his response.

If you wake up early enough, there’s no traffic. This is a metaphor.

Worked for a PE firm… $3B fund, middle market. We had grown EBITDA 3x in about 3 years, half organic and half via acquisition (and half of the acquisition EBITDA was synergies we executed). We go to sell the company and the MD asks us to project gross margins by projecting every single SKU’s gross margin for the next 12 months We had ~200k SKUs. I told him (politely) that there was no way that effort would be worth the energy. It would take us weeks to accomplish that and at best we would have a forecast that assumed two major variables - price and mix (we had about 6 mos visibility on future costs). He wouldn’t listen. Had to have this done. We spent about 30 days trying to get something together. In the end he realized it was a futile effort. Anyway, his delay lost us a lot of momentum and his continued micromanagement through the sale process eventually botched the entire thing. Didn’t sell. Devastating. Don’t assume PE knows what they’re doing.

Must read. John Malone is one of the best operators of all time. The chance to be inside his mind as he breaks down his career and long list of deals is unreal.

A couple years ago I got to meet Brad Jacobs when he launched his new book. Somehow I got invited to 30 Rockefeller Plaza for the book launch. After riding the elevator up with a Fox Business host (she was emceeing), I was met by a line out the door of folks waiting to enter. I knew no one. So I waited in line dutifully and as I inched closer, I could hear the jazz band getting louder and louder. Finally, I went through the line and there was Brad. We chatted very briefly, he gave me a fist bump and I was on my way into the party. The party was filthy with investment bankers. I got my plate and headed to a cocktail table... and stood there alone. Finally a very nice guy named John sauntered up. "Do you also not know anyone here?" I laughed and said yes. "Yeah, I'm not even sure why I'm here." Turns out he was an investor from Dallas. Very nice guy. We chatted for probably an hour and then parted ways. A month or so later, I saw that guy on CNBC being interviewed about China and the markets. Interestingly, we had chatted about China. I later followed up with Brad to thank him for the invite. He asked if we could have a call so we met over Zoom and introduced ourselves. You can see why he's been so successful, even over Zoom. He was charismatic, engaging, and at the same time no nonsense. He knew my small hometown and made personal connections that would almost seem impossible. We left the call with clear action items and next steps. Since then, he has been working on QXO his latest building products venture - a rollup - starting with Beacon Roofing Supply for >$10B. Brad is like a public markets private equity guy. His superpower is raising capital and deploying a PE style playbook. That playbook, coupled with top shelf talent, has proven successful over and over again. Here is a post I did on Brad a while back in case you hadn't seen it: He has made billions for himself and investors after founding and exiting multiple businesses including: United Waste Systems United Rentals (NYSE: URI) XPO (NYSE: XPO) GXO (NYSE: GXO) RXO (NYSE: RXO) He is currently working on his next venture, QXO, a building materials distributor rollup. I was fortunate enough to receive an early copy of his new book and attend the launch earlier this year. His book is a great read for operators. "You need to get used to problems, because that's what business is. It's actually about finding problems…" He also despises "corporate constipation" - waiting for everything to perfectly align before acting. Here some other takeaways for operators: - Don't miss the major trends - Focus on the right problems. - Approach problems humbly - Think BIG - Technology is table stakes - M&A requires leaning in - Value people and their time

Recommend reading… Akin to The Outsiders or Intelligent Fanatics. Great chapter on Constellation Software. My favorite was Lifco. Overall theme, summarized: These acquisition-driven compounders operate with a simple and profoundly effective philosophy: decentralization. Push daily decision-making as close to the customer as possible, give extraordinary customer service, empower people with responsibility, accountability, and shareholder-friendly incentives, and give them ample room to grow. Pair this with an obsession and passion for delivering exceptional customer value and rewarding great performance, and people go the extra mile.

Coffee shops should have a separate line for those of us who just want black coffee.

On the US acquiring Greenland… every single major land acquisition the US has made was controversial at the time but ended up being a generational master stroke. Louisiana Purchase Florida California+SW Alaska Hard to imagine the US without any of those today.

Here are a bunch of my thoughts on private equity. They won’t be popular. That’s fine. I have been in investment banking or private equity for nearly 20 years, working with and for private equity firms. I’ve interviewed, met with, and interacted with hundreds of PE firms over the years. I’ve worked with good firms and bad firms, good people and bad people. I’ve seen what works and what doesn’t. So that’s my background, but I’m still just one guy with incomplete information, biases, and all the other baggage that comes with being human. Take it with a grain of salt. When I started in the space, private equity felt entrepreneurial. We called them “shops” (maybe that was just us?). They were hungry. They took risks. Success was not guaranteed. I started my career excited about the prospect of joining, buying, fixing, growing, and selling companies. Since then the space has changed. That’s natural in any industry. But PE has become commoditized. A systematic career ladder. People don’t join PE because they love businesses or because they want to innovate. They join because it’s one of the safest, highest-paid tracks in America. If you make it into the system- the right schools, the right banks, the right funds, you’re set. Worst case, you fail and go do something else in finance. Best case, you become a Managing Director (MD) and make generational money. That is not risk-taking. That’s joining a protected class. The industry has been drifting. There are more firms than ever, more funds than ever, and more Patagonia vests being sold than ever before. Profits attract competition. That’s not new. What used to be exciting and entrepreneurial is now systematic. And people inside it are deeply defensive of this system. They don’t want change. Why would they? The system is working for them. It’s the rest of us who are just not appreciating how much value they actually create! (PE is not exactly known for its humility.) But the system is good if you can get inside. Use other people’s money, take out debt, charge fees, and enjoy preferential tax treatment. Still, there are signs of cracking - more recently, returns mimicking the S&P500 and longer hold periods are increasingly normal. Continuation funds are more common. But the point is the system is asymmetric to the benefit of the private equity firms, the GPs. Private equity general partners make money whether their investors do or not and sadly, whether they improve the companies they buy or not. How? Fees. Fees on capital raised, management fees levied on the companies, transaction fees, reimbursements, etc. Keep in mind, these fees are disconnected from performance. Management fees are based on capital raised or charged to the companies for the pleasure of their ownership. On top of that, there can be other fees- transaction fees, deal fees, reimbursements, etc. So right out of the gate, the firm is making money, whether they perform or not. And when private equity does perform, they take a meaningful chunk of that value too. The classic 2&20 structure means they take a 2% fee on the capital raised and 20% of the earnings above a certain threshold (carried interest). All together, ChatGPT reports private equity GPs collect 30-40% of the total economic value of any given deal (it actually caveats that it may be more like 40-50%). Carried interest is designed to align incentives. It is payment for the firm's labor - not return on their own investment. The partners at a private equity firm may invest their own capital, but that is not what we’re talking about here. I’m just sharing the typical take home resulting from the structure. Lucrative. On top of capturing a huge chunk of the economic value, believe it or not, much of the take home pay actually gets preferential tax treatment. Carried interest is taxed at capital gains tax rates, not ordinary income. But that makes sense since PE labor is creating real value, unlike teachers, plumbers, engineers, police officers, salesmen, warehouse workers, bakers, pastors, waitresses, lawncare workers, doctors, nurses, dog trainers, construction workers… you get the point. To be fair, you can’t blame private equity for this - it’s the tax law. They’re just capitalizing on an opportunity, but again, it’s asymmetric. Depending on the year, the private equity partner might pay a lower tax rate than the warehouse worker in the company his firm owns. It’s the Warren Buffett/secretary example. Private equity’s job is to generate returns. That is the job for which they labor. And yet their labor gets taxed at 15–20%, while your labor gets taxed at 25–37% plus state? It just begs the question… why in the world are we subsidizing the labor of private equity? Keep in mind, they’re not deploying their own capital. They’re not the ones who have the capital (they’re just in the process of collecting it). They’re not the ones who run the business. PE buys companies with other people’s money. They charge management fees to the company they own. And when they sell, they collect carried interest taxed as capital gains-not ordinary income like the rest of us. But they don’t just buy companies with other people’s money - they also use debt. Glorious, non-recourse, printed-from-thin-air debt. This debt creates risk. Obviously. But if the PE firm drives a company into the ground, they can walk away. Move on to the next deal with no obligation. Employees lose jobs. Customers lose a supplier. Banks lose their money. But the PE firm keeps their fees. They move on to the next deal. Again, asymmetric potential losses relative to the potential gain. Meanwhile, the small business owning pharmacist who takes out an SBA loan to build his own business has to personally guarantee his loan. If the business goes under, he’s making payments until the bank is whole. A student making an investment in education, with hopes of earning a living (future returns) is stuck with his loan too, even post bankruptcy! So the pharmacist and student have to pay back their loans, but a private equity bro can load a company with debt, run it into the ground, and walk away scot-free? Make it make sense. (By the way, when new debt is issued, money is created out of thin air. This dilutes the power of your dollar- but that’s a topic for another day.) Inside portfolio companies, the dynamic is just as distorted. MDs suggest ideas. Everyone scrambles. FP&A burns weeks. CEOs chase ideas they know are dumb because saying no is dangerous. CFOs burn out. Operators are neutered. I used to think the people in seats before me, who I replaced, were weak. Losers. Why did this guy make this decision? Do things this way? Now I realize they were just beaten down, neutered by spreadsheets and initiatives. They were playing to survive, trying to hang on until their company sold. But PE folks are mostly people who have never run a business, much less worked inside one. They know debt, models, covenants, and exit multiples. And now their spreadsheets impact the most intimate parts of your daily life. They’re buying everything: Dentists. ENT practices. Veterinary clinics. Auto shops. Gyms. Valve distributors. Engineering firms. Healthcare groups. Fast casual chains. Your lunch. Your teeth. Your cancer treatment. Do you really want spreadsheet-driven finance firms deciding how much time your dentist spends with you? Or which treatment plan your oncologist uses? Or where the meat on your sandwich is from? These are finance guys with spreadsheets. Again, these are people who have never been in a business much less run one, and you think that they have the tools and skill set and judgment and moral compass to drive businesses that impact not just your day-to-day life like where you have a sandwich, but your actual health? Your lifespan? Do you expect to live longer with private equity backed healthcare? Take Jersey Mike’s. What do you expect now that PE owns it? Higher quality meats? Better trained employees? No. You expect: prices to go up, quality to erode, employees to become less friendly, the store to be less clean, etc. That’s not innovation. That’s a transfer of wealth from customers and workers to shareholders. And that’s a core problem with private equity - there is no innovation. There’s no risk taking. How can you when you are going to sell as soon as you can? (but not before three years - gotta get that cap gains treatment ;)) Hopefully we’re wrong and we all love Jersey Mike’s even more in a few years but the point is - that’s not your expectation when you hear PE bought your favorite restaurant. No one is excited when they hear private equity bought their favorite business. That tells you a lot. Operationally, private equity often claims to take a long term view but when you know you’re going to sell in just a few years, that’s just not what happens in practice. When you are thinking of selling your home, do you replace the roof? Nah, you just replace the shingles, put a bucket in the attic and hope the next buyer doesn’t notice too much. That may be an extreme example, but it does happen. Regardless of whether that’s the norm or the exception, it’s impossible to be truly long-term oriented when the incentives are to maximize short-term gain. Truth is, PE is optimizing for 3-7 years time horizons, not a 20-year competitive advantage. There is no vision setting, no ideating ten years down the road, no innovation. There are just hard, cold initiatives designed to “optimize” and drive the profits higher. What would I change? Despite the above, I think private equity investing can be a force for good. Like I said, I’ve seen great firms, great deals, and great people. It can be done well. PE would do well to recognize how others perceive them, address the criticisms, and adjust. You see some attempts at that lately (e.g., KKR’s employee equity program being emphasized and advertised), but PE is just not great at admitting mistakes. They seem (to me) to be in an especially defensive, insecure posture. That may be because returns have diminished, holds are longer, and continuation funds have risen in prominence. But there’s more to adjust than just perception. Longer holds would help. Making firms stand behind the debt they use would help (at least require them to pay back the mgmt fees they’ve collected when a company defaults). Transparently connecting fees to performance would help. Ending preferential tax treatment for carry would help. Forcing PE bros to actually work inside operating businesses they control would help. I think the industry is heading for a bifurcation. The mega-funds will keep getting bigger. They’re powerful and political and will dominate fundraising. At the other end, lower-middle-market firms will keep creating real value by taking small businesses to the next level. The middle will get squeezed. You already see it… middle market firms selling stakes in themselves to the big guys (just another PE deal). The real bottleneck going forward won’t be capital or deals. It will be operators. Financial engineering has been competed away. Sourcing has been automated. Spreadsheets can be done with AI (or will be soon). What actually creates value now is people who know how to run, fix, and grow businesses. That’s a good thing, I think. The emphasis isn’t even really on operators so much as it’s on creating real value. Maybe PE bros need to lose the deal sleds for boots and become operators themselves… Which raises an uncomfortable question for private equity: if great managers will create more value in the future, why do they keep giving most of the economics to spreadsheet people? I think for PE’s next chapter, you will see some corrections, and I think those will be great. I think time horizon will be forced longer. You’ll see fewer 3–5 year windows and more 5–7. I hope that goes to 7–10; maybe it will. For my money, the lower middle market is the place to be for the foreseeable future in the PE ecosystem. There, it’s genuinely helpful to equip companies with new tools, sophistication, and access to capital that they may or may not have ever been exposed to. “Launching” these smaller businesses to the next level is valuable to all of us so long as it doesn’t end up in the never-ending cycle of selling from PE firm to PE firm to continuation fund and so on… Despite the dour assessment, private equity isn’t evil. It’s just a tool, a strategy. Or it’s supposed to be. There are always good and bad firms, good and bad people and so on. Good ones exist for sure. But that is just not the dominant flavor anymore. The GP captures upside through fees and carry while transferring downside to LPs, lenders, workers, and the state. This is a structural free option. Private equity is the only industry where you can lose other people’s money, fire workers, default on debt and still become personally richer. It has generated a commoditized wealth-extraction machine that increasingly shapes society without accountability. And I don’t think anyone wants to live in a society run by spreadsheet aristocrats.

The faster you move past the spreadsheet phase of your career, the faster you will encounter major success.

What is the nicest way to end an interview early when you know it's not a fit? (as the interviewer)

Seems like we can all delete our openclaw agents now... Fun while it lasted.

What multiple would you put on this business? - $12M sales / $1.5-2M EBITDA - industrial distribution - 9 vendors total - 2 customers are 20% of sales - 40 years old How would your multiple change if you were one of the two customers?

Worked for a PE firm… $3B fund, middle market. We had grown EBITDA 3x in about 3 years, half organic and half via acquisition (and half of the acquisition EBITDA was synergies we executed). We go to sell the company and the MD asks us to project gross margins by projecting every single SKU’s gross margin for the next 12 months We had ~200k SKUs. I told him (politely) that there was no way that effort would be worth the energy. It would take us weeks to accomplish that and at best we would have a forecast that assumed two major variables - price and mix (we had about 6 mos visibility on future costs). He wouldn’t listen. Had to have this done. We spent about 30 days trying to get something together. In the end he realized it was a futile effort. Anyway, his delay lost us a lot of momentum and his continued micromanagement through the sale process eventually botched the entire thing. Didn’t sell. Devastating. Don’t assume PE knows what they’re doing.

Discovered Stripe Press last week…

2024 was a major transitional year for me. You may have noticed I have posted quite a bit less lately. What I have posted has mostly been cryptic allusions to the battles I’ve been fighting. Suffice to say, I have been making some major professional changes. In 2025, I will exit the PE Operator seat and move to a family-office backed company as CEO. From the outside, that may not seem like a major change but IYKYK. Why am I making this change? Time horizon. It is nearly impossible to build a great business like I want to build without a long-term mindset. While PE excels in creating a sense of urgency and installing accountability, it can also force operators into short-term thinking, especially when things aren’t going well. Many PE firms claim they don’t worry over quarterly earnings like a public company. But in reality, most do. And on top of that, there is always looming, ever discussed conversation around exit. Exit (selling the business) informs and dictates every decision. Show me the incentives and I’ll show you the behavior. PE doesn’t have time to ask the question: what could we accomplish in 30 years? It’s not the model. And there’s nothing wrong with that. PE serves a function. But I’ve realized that most of the companies I admire took a different, long-term mindset (e.g. Amazon, Danaher). So my goal is to combine the best of the PE mindset (plus a dash of the startup & SMB mentalities) with the benefits of long-term compounding. I am excited to start building! Final note… None of this would have happened without X. It seems crazy but I can trace the exact path from the first time I ever reached out to someone directly over X two years ago, to starting this account, to taking on this role. I have not yet figured out exactly how to use the platform for my new role yet, but I fully plan to explore that (even considering doxing myself). So thanks to all of you who supported me, retweeted, commented, etc. I literally would not be sending this note without the support a bunch of strangers have shown this anonymous account. Happy New Year to all - may 2025 be your best yet!

Met a guy the other night at a work dinner. Probably 57 years old, pseudo-retired and apparently successful. We talk a little -pleasantries- then I say “so tell me a little about yourself.” He jumps into it… “so I went to Brown undergrad, Wharton for my MBA…” And right there I’ve made my assessment. If you are under the age of 27 and in an interview, talk about school. Fine. But retired in your 50s and that’s the first thing out of your mouth? When I’m meeting someone I want to hear something interesting. Ivy League is not interesting. In fact, it’s boring. I want either want to hear about results/experience or hunger/passion or even your personal life. Crazy thing is this guy didn’t need to impress me. He wasn’t asking for a job. But he was still trying to impress with something that happened 30 years ago. And, he thought it would work! Hopefully your greatest business accomplishment didn’t happen when you were 18. There is nothing wrong with Ivy League education. In fact it’s supposed to be the best. The problem is when you believe it entitles you to anything- money, a job, an opportunity, success, respect. Unfortunately that is all too common. Entitlement breeds laziness. Give me someone with PSD (poor/smart/desire) and we will freaking change the world.

I worked for this guy in investment banking… He was a great guy, very smart. I learned a ton from him. But no matter how precise the model or how perfect the slide deck, he would have tons of comments. This is normal for investment banking. Analysts work for Associates working for VPs working for MDs. Everyone has to prove their value by having something to say. Anyway, this particular guy would bleed all over everything (back when you actually printed the slides and he marked it up with red ink). I would slave away for hours and hours- work nights and weekends- only to spend the next week making endless edits. Some of you are thinking “this is the game.” Yeah, but it had negative consequences. First, it’s just demoralizing. Invert it. Imagine I showed up and he said “looks great.” That would have felt amazing. So the opposite eventually just wears you down. Second, you quit trying as hard. What’s the point? Whether I take my work product to 99% or 80% or 60%, it will be unrecognizable after the edits anyway. I’m not saying I made an intentional decision to slack off, but I’m sure it happened. I was demoralized. Lesson from all that is- know when to keep your mouth shut. Obviously sometimes you need to edit. But you don’t always prove your value by making edits. Often, you just prove your position. Every associate knows this but somehow forgets when they become an MD. And btw, let your people fail. Ask them do something and pass it along. Let them own the result, especially when the stakes are low. They will appreciate your vote of confidence and learn a ton.

Doctor friend of mine is a partner at a firm considering selling to PE. He had several meetings with his partners. We’ve been talking but he calls me as he’s on his way to meet for the last time. Final decision coming. What should he do? Their practice has been approached a few times now and each time it seems they get a little closer to selling. His issue is he’s got partners who are retirement age with no way to monetize their equity. The younger guys typically don’t want to sell. So anyway, he calls me for advice and we talked through it. My advice was: don’t do it. Yes, the PE firm will drive more revenue, sure. And yes, you might not work more hours per week. But there are trade offs for their money. The good: get a check, probably drive revenue higher, probably drive costs down and efficiency up. The bad: less autonomy, less flexibility. You may not be able to do the procedures you like because they aren’t profitable. You will spend less time with patients. Patient outcomes will become less important. Basically, for the check, you will become an employee to efficiency experts. That resonated. Most doctors put in a decade+ for school. To do that, it’s usually about more than money. It’s about helping others, driving change, having some sort of positive impact. As true for my friend as anyone. Being a doctor is his worldly identity. Fortunately, after that meeting he called to tell me he had convinced his partners to decline the offer. But make no mistake, PE will be back for them (and in greater numbers). PE is gobbling up healthcare practices across the country. That will have good and bad outcomes. I just hope the doctors selling don’t lose the motivation to become a doctor in the first place. It’s not always about money.

Had a request to post the bookshelf. Here ya go. Many great reads. Let me know if any of these look interesting.

I have yet to meet one person who is excited when they hear Private Equity bought their favorite company. Why do you think that is?