Tailwinds Edition #3

August 10, 2019


The name “Tailwinds” was recommended to me by Nick Haschka and what he meant by it was someone looking to build something special, like a business or permanent capital, should position themselves where there is a tailwind at their back taking the form of changes in the economy, culture, cities, demographics, or some other factor. It also relates to private company investing in two other ways, the first being that buying an existing company, rather than starting your own, gives you momentum and a head start, a proverbial tailwind. Second, the concept of positioning yourself in front of a tailwind relates to a Charlie Munger quote about fishing where the fish are, rather than a crowded shore or dock. Private company investing is a space with opportunity that most investors and institutions cannot touch, and that leaves the door open for smaller investors to build portfolios.

I hope you like the newsletter, please feel free to reach out to me with your thoughts, feedback, or ideas, I’d love to chat!

Prelude

I didn’t have quite as much time this week to find nearly as many resources as I’d like due to releasing a new podcast episode, but I still managed to find a few that were really interesting. Not all links will be micro PE related, some will simply be ones I found to be the most thought provoking ones I came across in the last week. I’ve even included an article about Bill Belichick (full disclosure: I’m actually a Steelers fan) because I’m fascinated by the way he runs his program and the unreal attention to detail and process he has. I enjoy looking for information and resources on micro PE, but I’m only one person and I’d love your help to keep finding interesting pieces to read and learn from. Please feel free to send me anything interesting you’ve been reading recently, I’d love to take a look!


Capital Notes

Sears’ Seven Decades of Self-Destruction

“Sears, characteristically, dismissed the comparison as meaningless: “We compete with Walmart on only 30% of the goods we sell,” sniffed a spokesman. It seems, in hindsight, an unwitting admission that Sears was selling only 30% of the goods consumers wanted most.”

This quote right here perfectly encapsulates Sears’ decline as the dominant retailer in the U.S. Years of bureaucracy growth into new lines of business that didn’t make sense, neglecting the retail side, and doing what they thought was best for themselves rather than the customer, all led to their downfall. As a business owner, it can be hard to admit that the path you’re going down is the wrong one, or your competition, rather than the “market environment” is legitimately beating you in the market.

Other Notes

So You Want to Work for Bill Belichick?

“For many years, these breakdowns were recorded on what Belichick called "the pads." Coaching assistants would diagram each play, illustrating receiver splits, depth of routes, depth of the halfback behind the quarterback, alignment of the defensive players, shades of the defensive linemen, the protection of offensive line. Notations for each category were made at the top of the page.

"There was a box and a location to put it down, and then you had to draw each play by hand," said McDaniels, a coaching assistant from 2001-03. "And I'm not talking about a rough drawing. I'm talking about a drawing that would take you 10 minutes."

Between the identification of scheme and detail, each play could take as long 20 minutes to diagram in full. Each game had 50-70 plays on each side of the ball. Each coaching assistant had three breakdowns per week. Game breakdowns, not mental breakdowns. Although one could lead to the other.”

I’m a Pittsburgh Steelers fan, which means I have to hate the Patriots by default, but I can’t help but admire how Bill Belichick runs the New England Patriots. The attention to detail that he demands out of his players, coaches, and analysts is simply unparalleled. When he has his analysts start charting plays from opponent’s games, he even goes so far as to ask them to write down which ways the quarterback turns his head before the play starts. You want to learn how to run a winning and detail focused organization? Look to the Patriots.

Hugh Howey Interview on Farnam Street

You can’t get there in one day, but I’m going to start nudging … If you can just maintain that consistent energy in one direction, it’s incredible what you could deflect over a long period of time. And for me, just one hour a day of writing, you’ll write a novel in a year guaranteed, and if you don’t care about the quality of that novel, it’ll be better than you think.”

This quote is my favorite and really resonated with me in regards to learning about micro private equity and starting the podcast. I knew that if I just kept talking to one person in the industry per day, reach out to three more, and keep learning about micro PE, good things will happen over time. I love the idea that we overestimate what we can do in 1 month (or whatever time horizon the original quote was) and underestimate what we can do in a full year.

This interview was also interesting to me because I thought about writing fiction on the side and even wrote a little bit on a few stories. It’s unlikely to be something I pursue, but while I was interested in the path I came across Hugh Howey and his Reddit AMAs and found his approach to be refreshing. To this day, I love learning about authors and how they come up with ideas and write them out. Really anyone who writes is interesting to me.

Index of Warren Buffett

I’ll just leave this here for all you Buffett nerds to discover…

If you found an interesting article, podcast, or interview that I missed, please let me know, I’m always looking for interesting stuff!

Photo courtesy of Brenda Stonehouse