Tailwinds Edition #5

August 24, 2019


The name “Tailwinds” has a threefold meaning; 1) If you’re looking to build something special, like a business or permanent capital, you should position yourself where there is a tailwind at your back taking the form of changes in the economy, culture, cities, demographics, or some other factor. 2) Buying an existing company, rather than starting your own, gives you momentum and a head start, a proverbial tailwind. 3) 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 want to try out a new format for Tailwinds. I’m still very new to writing newsletters and I want to try out different ideas to see what works for me as the writer and you as the reader. The normal “What I’m reading” links will still be at the bottom of this article as I believe there’s a lot of value for both me as the writer and you as the reader to post interesting resources I find.

I mentioned last week that I want to become a better writer and I think adding a more narrative structure to these newsletters will help me refine both my writing and my thoughts on the previous week. I also think it will be a helpful way to just share what I’m thinking about, and hopefully get some of your feedback. Seriously, just hit reply to the email and let’s chat! It’s amazing how many people have used the contact form or replied to a newsletter edition and it resulted in a fascinating conversation and new relationship.

Now, last week I mentioned how I want to be a better writer and that has been a research theme for this past week, the final two Capital Note links being examples. I get a lot of value out of reading interviews of authors and writers such as Michael Crichton, Tom Clancy, Stephen King, Ben Thompson, David Perell, Hugh Howey, and Morgan Housel on their writing process and mindset. Those final four authors add color to writing online and the power of sharing those written thoughts, in addition to the benefits writing provides for your thinking. Every one of those authors also has said that the best way to become a better writer is to write, and write everyday and get feedback on your writing. I’m hopeful that mixing up the format of the Tailwinds newsletter and getting feedback from you as the reader will help me improve my writing.

Another subject that has really caught my attention this week and the previous has been marketing and branding for micro private equity and permanent capital firms. In the vast majority of businesses, the purpose of marketing is to increase sales. But what purpose does it serve for an investor in private companies? Increased deal flow? Perhaps, but likely not initially, or for many years. In an email string with Brent Beshore, I asked him about his content marketing and its effects on inbound deal flow. He said it felt like they were shouting into the dark for five years before it started to snowball, and now their direct deal flow doubles in quality every 18 months. Talk about having a long-term mindset and just grinding away without getting much in return!

What I do believe marketing can provide for investors is that verification that an owner/broker/intermediary might search for after hearing about the investor to confirm who they are. Making sure an investor’s website, firm about page, articles, messaging all aligns with their values, and the site effectively communicates what a firm does is important and the kind of marketing I believe investors can benefit the most from. Writing articles and content can be especially helpful but, going back to Brent’s point, won’t bring in direct deals until enough momentum has been developed already.

Marketing can also help an investor attract new partners, employees to their firm and portfolio companies, and help find like-minds to compare notes and ideas to. Finding these groups of people is really hard, but producing some sort of marketing or content that can be widely seen and distributed can help you find these groups of people. (I can attest that this podcast and newsletter have proven this true)

One thing I believe is crucial though to creating any sort of marketing is authenticity. It’s really easy to tell when an article, podcast interview, or Tweet exists purely to market a product or service, and frankly they’re boring. Effective marketing is when it’s a genuine interest of the writer and passion and curiosity exist. You could argue this newsletter and podcast is marketing (although there’s nothing to sell), but this is truly something I’m curious and want to learn more about. This was all created to connect with and build relationships with investors in micro PE and I think it’s been reasonably effective because it’s an authentic interest, not because I’m being paid to sell something to investors and readers.

Capital Notes

Founder of Chick-Fil-A Explains the Best Business Decision He Ever Made

“Everybody needs a break – Operators, their team members, our corporate headquarters staff. I also believe that the store itself needs a break. Even the equipment needs a rest after working hard for six days. The only way to make sure we all get at least one day off every week is to close. Companies that are open seven days a week may try to rotate days off so that everybody gets one day off every week. But if the business is open, you’re going to be thinking about it, even if it’s your day off. That takes away from your relaxation.”

Top 50 Reasons Why Professional Athletes Remain Wealthy

1. They pay themselves first

5. They know the difference between someone that makes a lot of money and someone that is wealthy

10. They wear condoms

23. They network

26. The buy the right watch not the bright watch

34. They learn to play chess

48. They know if it sounds too good to be true it probably is

Part I of History of Visa

“Diner's Club signed up different merchants to accept their card, and promised to reimburse them for any charges made on it—even if the cardholder never paid their bill. Thus, the merchant received all of the benefits of selling on credit, without any of the headaches (e.g., bookkeeping, billing, and collecting). And customers benefitted too. For the first time, they could use a single card to make purchases at many merchants. Within 12 months, the card had 42,000 members and was accepted by 330 merchants.”

Alex Danco: History of Rene Girard

“As we grow up and live our lives, we watch others and learn what it is we ought to want. Aside from the basics, like food, water, shelter and sex, our desire for any particular object or experience is not hard-coded into our DNA; we’ve learned to want it by watching other people. But what is hard-coded into our DNA and hard-wired into our brains is the desire to be; and to belong. The true root of all desire, Girard and others argue, is never in the objects or the experience we pursue; it’s really about the other person from whom we’ve learned to want these things.”

John Scalzis: Utterly Useless Writing Advice

Being a freelance writer is interesting and not really a good thing for people who don’t enjoy a permanent sense of panic.”

Morgan Housel: Why Everyone Should Write

“A common question people ask professional writers is, “Where do you get your ideas?” A common answer is, “From writing.” Writers don’t know exactly what they’ll write about until they start writing, because the process crystallizes the fuzzy ideas we all have floating around. This chicken-and-egg problem is probably why writing is intimidating for some people. They don’t think they can write because – in their head, as this moment – they don’t know what they’d write about. But hardly anyone does.”

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