YouSaid · the spoken record

Brent Beshore

lines on the record: 187
first: 2024-06-11
most recent: 2024-06-11
sittings or episodes: 1
sources: podcast

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“Is totally not true. And so we think about a lot of this stuff as we are recruiting. We think about a lot of like, okay, what are the things that we're asking this person to do and what type of person Would be good for that. And then the other one that I've really enjoyed is Enneagram because it really shows you what is your underlying insecurity and what are your primary drives. So there's nine numbers and each one has a very different set of And minuses, strengths and weaknesses. And so when you're able, again, none of them are perfect. You're not, it's like, oh, I'm personally like I'm a three, two.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“But for us, it created a tremendous amount of empathy. How I made decisions and how she makes decisions. By the way, we're opposite on every single category. You can imagine that Mike creates a friction in a marriage. Same thing in work relationships, right? Asked, what do people mostly get wrong? I think we get wrong is that we assume everyone likes us, and so if you have a certain attribute set, you tend to want to look at the whole world through that attribute set and say, oh, well, everyone I hire should have that attribute set. And if they don't, they're bad, they're a bad fit.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“To make a decision, I need a deadline to do things. And so again, if you understand people based on these four parameters, then you can really have a lot of empathy. Like my wife and I did this personally testing together in each other's presence, and I'll never forget my, you know, we're going through these lists of like, are you more like this or are you more like this? Whatever. And she's like, of course, this. only in maniac would be that and i'm like yep i'm the other one and literally at one point she looked over and and i could tell but like look in her face was like i have children with this man like what who is this right but again we're all in our own heads like we think that the world works the same way”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“So we feel our way to decision making is how will it impact the world around me? How will it impact my relationships? How will it make people feel? Now, again, it's not like I don't have a rational side and I can't consider ideas and it doesn't mean a thinker can't feel anything. That's not the point. The point is which is the primary lens that you look through in life, right? And the last one, which is really interesting, is lifestyle. This is a J versus a P, a judger versus a perceiver. And it's really about how you like to move through the world. Do you move through the world in sort of an orderly way? Do you like structure? Do you like to have a decision to make? You gather information, you make a decision, you move on. You like things structured. Or are you a maniac like me who is a perceiver who is kind of open for whatever? I loop on things. I need to be forced.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“That's how they make decisions. So they're making decisions based on what is truth and how am I seeking it. Feelers, on the other hand, by the way, most men are thinkers, so 70% of men are thinkers, 30% are feelers, 70% of women are feelers, 30% are thinkers. When we go back up to the sensing and intuitive, it's about 75, 25 sensing to intuitive. So 75% of people are present oriented, 25% are future oriented. And so I'm like the super weird combination, right? Where I'm external focused. I'm an extrovert who is intuitive. So right there, I'm in the 25%, right? Introvert extroverts 50-50. I'm in 25%. And then I'm in the 30% of men that are feelers. So feelers base everything on relationships and values.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“There's always upsides and downsides to each one of these. But once I can tell, okay, where's somebody powered from how does somebody process information? The third one is how do they make decisions? This is a really important one. So thinkers and feelers, two basic categories. Thinkers are all about ideas. About truth. So they're seeking truth. They're seeking ideas. They're very achievement oriented. They want to get things ordered up and neatly packaged.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Very practical, they're very reasonable, they're very rational people. Intuitives like maniacs like me, we start into the future and then we walk back into the present. So we get excited about ideas. We're like, oh, we vision this future. Oh, what might that be? How might that work? What might we do? Who could come along with us, right? And then somebody says, a sensor comes along and says, excuse me, I'm glad that you're 10 years in the future right now and you have these grandiose visions of where you're going. We've got to make payroll this week. And by the way, that's on fire and that's on fire. And like we need to be here. So you need both, right? That's the beauty. None of these, like being introverted or extroverted, they're just strengths and weaknesses, right?”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Are you intuitive or are you high sensing? This tells you a lot about where somebody starts in how they think about life. So sensors think about life in the present. Their present oriented. They walk from the present into the future.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Out, I am weird. So are you. So is everyone you meet? They're weird because they're mixtures of all these different axes of how we sit on these things, right? And how they interplay and interact with one another. But I can tell you, as an example, once I understand sort of the four axes of Myers-Brigg So, where do you gather your energy as the first one? This is introverted, extroverted. This is not how you show up in the world. This is where you gather energy. So introverts can appear extroverted. Extroverts can appear introverted. That's where this sort of, you get these very basic ideas about how the world works and you sort of hear like a little bit of these things and you get misperceptions of what they actually mean. So it's really important to understand, are you getting your energy from inner life or are you more”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“This is the heroin addict who's choosing heroin over eating a meal or leaving their family. In that moment Believes they're doing the right thing for them, believes it's rational to pursue that hit. Versus do everything else. So the question you have to ask yourself is why, right? And same thing in companies, same thing with leadership in these firms. Like the question is why? What do we think? Why did that person go off the rails or how did that person suddenly disintegrate before our eyes? Or why is that person performing so incredibly well? And so these different personality testing, no one's the box. No one is a, you know, in the 16 types for Myers-Briggs or whatever it might be. There's no grouping that will perfectly describe anyone. That's not the point. The point you've missed it if you think that you're going to put somebody into a box and it's going to predict 100% of their behavior. That's why I like having multiple of these that kind of give you a 3D look at people. I mean, my experience is it was an eye-opening, I assumed that everyone else operated the way I operate. I assume people wanted what I wanted.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“This is where the knowledge project has been super helpful. The work that you've done, collecting the best of what other people have figured out, distilling it. I mean, this is what we're all trying to pursue. And specifically around the wisdom of clicking over these lenses of these personality tests provide and giving you a framework to create empathy and create predictability in relationships. I think that's probably been the biggest leap forward. And what most people get wrong is most people don't understand why people are doing what they're doing don't understand how they should think about incentives based on the person themselves and not just the financial incentives and don't have much empathy for how other people react. So take things personally that aren't personal. You know, everyone acts rationally in the moment.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“There's no way to lose. And when we don't predict the behaviors of people, we're almost certain to lose, like an increase in incredible volatility into the system. If I think about my job as CEO, I need to be helping our team to be the most thoughtful, well-educated, up to speed on predicting human behavior.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Another journey I've been on, speaking of these added tools in the toolkit, is I've really become much more familiar with different personality testing. And specifically, I've looked at a bunch of them. I really like the combination of Myers-Briggs and Enneagram. If you think about our business as, you know, we take money and we turn it into more money, I think you miss the most important thing that we really do, which is our whole business is predicated on predicting the behaviors of people. Like, if we can predict the behaviors of people”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Maybe an important person in the kingdom, but you're not the king anymore. It's hard. It'd be hard for me too. Would I be okay with RLPs coming to me and saying, Brent, I don't think you're the right person to lead permanent equity Gonna lie and be like, oh, that'd be a great conversation to have. Hope that I would meet it with curiosity. I hope I'd meet it with self reflection and say, wow, I really want to hear. I mean, I think I disagree, but I want to meet it with curiosity. See what they have to say See if I could discern out of it. Maybe I'm not in the right role”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Over and over and over again, I've watched this tragedy happen, which is the Peter Principle. Someone rises and they rise beyond their abilities, and then they can't take a step back. Their pride, their ego, their identity is rooted now in their title, in their position. And You say to them, We love you. We think you're awesome. We'd love for you to continue to be with us. The role you're currently in is hurting you and hurting those around you and hurting the company. They'll acknowledge that. And then you'll say, Great, could we get you into this role? No, absolutely not. Fight claw for territory, kingdom building. Hard to go from being king.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“And we can't see ourselves clearly. Like, we are a mystery to ourselves. And how we see ourselves in our talents and our weaknesses is often different than how other people see us. This is why we need each other. This is the whole point of relationship. This is the value. And this is the terror of where we've gone as a side note with social media being so isolating, with not having in-person relationships. Like this is, no wonder that deaths of despair and suicide attempts and anxieties through the roof, right? We would love to be able to take somebody, hey, you're in the CEO role or maybe in the CFO role or whatever it is, and we need you to take a step back, you know, in order to move forward. Careers often die by suicide, not by homicide. Like, it's not.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Mean that would be wonderful to be able to do that. I think that a lot of people's careers would benefit if they had the humility to be able to do that. Fundamentally, we all struggle with pride.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Their lives are not enjoying life. They're not enjoying their role, their fear based, right? When you get into a position where things are not going well and you don't know why and you don't know how to get out of it, it's terrifying. And part of what our role is is to help people. We look fundamentally like our job is to serve and help others. If we can serve and help others succeed, we're going to succeed. Our LPs are going to succeed. And to be honest, we screwed this up. We have not done a good job of getting people the help and moving people into roles that they should be in or having them move on to outside roles. And we need to do better at them.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Too much early in my career to the promises and to the optimism that things would get better when things weren't great. And if you look at where we have really succeeded is working with people who were doing well and making them better, where we've really fallen down as a firm is when things get dicey, we tend to defer to relationship. And we tend to trust. And they're stressed out.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“It's hard. It's hard and it's messy, is the answer. Since we're talking about comparing us to traditional private equity, I would say it's one of the things that traditional private equity has gotten done better than us in some ways is held people accountable. I think they go too far in one direction. I think we've reactionarily gone too far in the other. You know, in terms of the performance of permanent equity as a firm, I would say in absolute terms, we're not doing as well, nearly as well as we could. And this is an area of active learning for us. I'm just being honest and transparent about it. We've been tolerant of a lack of performance to a degree that is unhealthy, not only for the companies and the returns, but also for the people that are engaging in that behavior. And this is an active area of discussion right now in the firm. I'm giving you a real live view of what we're discussing. And it ultimately it's a failure on my part. Like I'm the CEO, I'm responsible for setting the tone. And I defer.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“If we have our choice, we're buying 51% to 70% of the business, and we want, we don't allow non-strategic actors. We want people who are actively engaged in the business to own the”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Oftentimes. Yeah. I mean, it depends on the situation where sometimes having these CEOs are rolling forward quite a bit of equity, depending on the situation. So sometimes they're getting equity or getting cash kickers on top of that. But oftentimes they're 10, 15, 20% owners in these businesses. And so the incentive is naturally baked in. We love that. We don't want to buy 100% of a company.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Interesting weird distortions happen in the market. We just want a perfect alignment. So we want that operator in the business to say the first thing I want to do is keep a healthy business with strong cash flow. Keep the golden goose cranking out eggs. Second, we want to take the proceeds free cash flow and look for high return, high probability projects in the companies. If we can find them, especially pre-tax, fantastic. Reinvest cash. They want to reinvest cash because now they reinvested $100 and now they've got $25 more dollars every other year following that. We love that too. We'd be happy to defer. We're getting $25 as well ourselves. Now our investors are like, of course, keep the capital. You've got great things to do with it. Keep it. So up and down the value chain, we're completely aligned.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“And they haven't really made a great return, but the business is bigger. And by the way, bigger businesses command higher salaries. So you play the game. It's a bigger business. It's a higher salary. More comp. It's like their incentives are off. The firm who bought them, they're two and twenty, buy levers drip and flip. Their incentives and the leadership team's incentives often are misaligned. LPs are misaligned. Everyone up and down the value chain of the traditional private equity structure is misaligned. Now, there's so much money flowing through the system and there's enough safeguards and there's enough discernment over a long enough period of time. It all kind of has worked. You can make an argument that when rates are continually decreasing for the better part of two and a half decades.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“This is where you see these businesses being run in ways that you're like, they are murdering money. They are destroying capital. How in the world are they getting away with this? And it's like, well, they're kingdom building. They're fusion building. Their incentives are build a bigger business. Because by the way, you hire the compensation consultants to tell you, well, yeah, the team, same team.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“What any family would do, right? What we do, that's what our investors want. They want to defer gratification. We want to defer gratification. And the same thing. We want to incentivize our leaders to do the exact same thing. So oftentimes the metrics that they're measured on is on free cash flow. But again, it's not free cash flow in a short period of time. It's free cash flow over a long period of time. So, when we don't have things to do with the capital, high probability, high return reinvestments, the dumbest possible thing you could do is keep a bunch of cash. I call the bladder problem, right? The more money you have, the more likely you're going to piss it away.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Was like, I don't need your fees, like, I don't want your fees. I don't want the incentive to gather more and more capital, which forces you to go up market. We can talk about that. I said, and I don't want to be able to win when you lose. I want to win win or a lose-lose situation. Like, I am willing to take the risk. I want to be entrepreneurial because that was my background. Like I was an entrepreneur. And so we have a model where we take no fees of any kind, no reimbursements of any kind from the portfolio companies or from our LPs. We get a percentage of free cash flow as we return cash back. That's how we share with our investors. Well, turns out what that does for us is it gives us the perfectly aligned ability to If there are high return, high probability projects to reinvest in the portfolio, we would be idiots not to take the cash, defer gratification, and reinvest it often pre-tax at high rates of return with high probability.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“I remember my lawyer, he was like, well, we just got to do diligence. I typed into Google DO diligence. It was Media Cross. We still owned it today. I remember getting that deal done, and I called up a friend who was like my one finance friend from undergrad. And I was like, hey, I did this thing. Like, I think it's a good deal. I don't know. And he goes, oh, you did a private equity deal. I literally googled private equity. I owe most of my career to Goog When I started studying it, I'm like, what? This doesn't make any sense, like all the incentives are off. And so, what I said was we came in and we were, you know, we ended up taking outside capital for the first time in 2017.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“What we are trying to do though is we're trying to have a complete perfect alignment between our LPs us and the people who operate these businesses on a day-to-day basis. So we're trying to all you from the same table, trying to use the same metrics. Practically what does that look like? I used to say unusual in our fee model. Now it's unique. I mean, we couldn't even get audited right out of the gate because no one knew what to do with us. We take no fees of any kind, no reimbursements of any kind. There's no cash that comes from either RLPs or the companies to us. Zero guaranteed revenue, which you're like, how do you run the firm? Thankfully, when we started the firm, again, we were operators, so we came in with cash flow and with businesses and fell backwards into this whole thing of private equity. I remember the first deal I did, it was close to accidental as you could buy a business. I bought it.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“You are hurting not just them, but their entire family, their friend group. Like you're hurting communities. Now, it's also not healthy to keep somebody in the role that they're in because you don't want to fire them. That's not healthy either. That's not kind. Nice. That's not kind. We can talk about that as a separate point.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Private equity detonating companies. This is where you see lots of problems. I mean, private equity, as an industry, when I tell somebody I'm in private equity, it's like we look up to lawyers in reputation these days. Lawyers have a better reputation than we do. And for very good reason, like there's been a lot of bad behavior. And by the way, the incentives. For the bad behavior, all the poles of traditional private equity leverage buyout model is towards bad behavior. Short-termism Treating people poorly Cutting all these things that hurt. You're damaging when you fire somebody.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Five years at most. Most private equity firms now are targeting what they'd like is two to three years. So from the time we buy something till the time we sell it is two or three years. Again, maybe four or five. If you get past five, it's really distressed at that point. Like you're trying to look for, you're trying to get rid of it and you can't. When we think about incentives, incentive for traditional private equity would be, Shane, I'd like for you to come on. I'd like for you to run, do a tour of duty, right? The tours of duty is kind of the way that leadership is done in traditional private equity. Once you do a tour of duty, it's going to be two to three years. You're not going to see your family much. You're going to work your tail off. But there's this pot of gold at the end of the rainbow. If you can get us our returns, you can get our investors our returns, then you get to share in the upside of that. It's a highly levered bet of sort of your time and attention. And we think that that doesn't make much alignment. And this is where you...”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“The reality is it takes time to find a business, get the transaction done. There's a sort of initial phase of getting to know the business. Once you buy, you really never know what you actually buy. No matter how much due diligence you do, you don't really know until you get into the weeds post-close. There's a period of orientation and there's a period in traditional private equity growth and trying to hit some sort of metrics to then sell it to somebody else, which by the way, selling takes time. So you've got to buy, it takes time. Got to operate, it takes time, you got to sell, it takes time. So they're really at max if you if you hit it perfectly in the fun lifecycle, maybe you get five years.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Which again goes back to time horizon. Tenure sounds like a long time. Shane, isn't that plenty of time to buy a business and hold it? Maybe. I think if you talk to most private equity people, they would say. Not the deals that they did that really hurt that they did that went poorly, the ones that hurt the most are the ones that they were doing great and they could see a long future of compounding that they just had to sell the business. You're like, but 10 years is a long time.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“And for us, when we look at traditional private equity and the traditional two and twenty model, right? So on the amount of capital that you have either gotten to invest or have invested depending on the terms of the agreement with your limited partners, you get a 2% fee annually that goes to covering your overhead costs and expenses of operations of the firm, the seeking out, the doing of the deals, the oversight and governance post close. And then once you pay them back with a return, typically six to eight percent, maybe 10% depending on the situation, then you get to share in the upsides of that. And the LPs, the people supplying you with the money provide you that capital for usually in private equity 10 years, roughly.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, so I think the ideal system is everyone's eating at the same table, right? So there's not different tables that the food falls onto one and then falls onto the other, right? Everyone's incentives are aligned to achieve the same goals”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“But if we align incentives properly, things that help us should help everyone else and vice versa. Like we will be taken care of if we take care of our people. We'll be taking care of if we take care of our customers. It's not a complicated thing, but I think, again, are we owners or are we stewards”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“A responsibility that we have. Yes, we get benefits from being a steward. Yes, we get to share in the fruits of the labor and progress of the company. But at the end of the day, my job is to make sure that these businesses remain intact, are healthy, and And when you look at it from that position, the world becomes a lot clearer. In the best interest of everyone else, but also me. I mean, I don't want to do things that harm us.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Who are you to tell me how to run my business? I own it. I can do whatever I want. I used to feel that way. Big shift for me was becoming a steward This idea of stewardship and not ownership. So the way I look at it is families are entrusting us to be stewards of their company.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“I mean, I think it depends on how you look at our roles. Are we owners? And I'm not talking about legal definitions here. I'm talking about mindset. If you own something, it is your property to do with it whatever you want. Do anything you want with it. So, like the pushback to everything, if I was going to strongman the opposing argument is, who are you to tell me what risks to take?”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Person, or eventually, might get sold to a strategic, but it forever is relegated to a lack of independence. Like, it will never be an independent ongoing concern for very long after that. There's just no examples of this. So for us, I don't think we're smart. I don't think we're trying to be geniuses. We just look at like, okay, the whole world is built on an entrepreneur or small group of people, entrepreneurs getting together, creating something that the world needs. It's hard. They built it over a long period of time. They inherently acknowledge the fragility of it. We just want to continue to honor them, their legacy, honor all the stakeholders, and all try to win together over the long term. I couldn't imagine a worse thing to do than to put dead on us.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“No one does that. And for very good reason, like, it doesn't make any sense, but somehow we've gotten ourselves as an industry in the finance industry into this position where it's like, it makes no sense how families build businesses. And by the way, every business starts as a small business. Every business starts as a family-owned business. They then take a business that has been operated a certain way for a very long time, gone through ups and downs, survived for 20, 30, 50, 100 years maybe. And then all of a sudden it's like actually what we want to do now is completely gut how the business operates and runs. We need to hit it with the steroid needle. We're going to get, we're going to jack it up with debt. We're going to strip it of a bunch of cost structure. We're going to hire a bunch of new people who are going to do amazing things in a short period of time. And then we're going to flip it to somebody else. And by the way, once you get on that treadmill, like once you sell to private equity, traditional private equity, do a leverage buyout, that business is forever going to be flipped to the next.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Reasonable cycle. To then throw the business into chaos. I can't imagine being an operator. And by the way. We've never seen a business that we want to purchase ever in the history of the firm that has debt on it. When we buy it, that has debt on it, like no families get wealthy by being like, oh, yeah, we have this great operating business. Like, let's pull a bunch of income from the future into the present and lever up because that would be awesome. So we can increase our consumption temporarily.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“And then we negotiate with the bank. Hopefully, we salvage it. Maybe we have to inject more equity in down the road. We're sure as heck not hiring. We're not buying parked packages for pennies on the dollar. We're not setting up for 10 years of future success and growth. We're not implementing new ERP systems. We're not implementing new. Process and ordering system the whole thing was basically gave us two years to completely rebuild that business from the ground up and to see the fruits of that is astounding the business is dramatically worth more than it was when we bought it in spite of having a pandemic and dramatically decreased.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“So, pandemic rolls around, and we're worried. Demand in the industry in our segment went off at one point by 88%. We started to struggle. And we looked at it and we were like, okay, let's, and by the way, the leadership team there did an incredible job of maintaining positive cash flow every single month through the entire pandemic. Everyone else was negotiating with their banks. Everyone else was firing people. And we were the only ones hiring. And we were building systems and we were taking risk and we were able to do that because we didn't have any debt. Everyone else is tied up. We weren't tied up. And the alternative is we lever the thing up and for, I don't know, four or five months we get a better return”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Called idiots. I mean, actually, even on Twitter, I think when we came up with our annual letter that year, people were like, like finance bros were like, you guys are morons. I was like, maybe. And oftentimes we are morons, which is good to be called out for it. But in this particular case, I don't think we were. And this is obviously way before we knew that there was going to be a pandemic. And, you know, this idea of like, did we get lucky? Do we get good? I think you can know that things are not going to play out the way you want them to and prepare for them not playing out and keep optionality open, which is going to decrease your returns in any given year, but give you the ability to survive over decades.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Assets highly leverable. Like banks would be happy to provide Predictable. Look at the history of the business. And we said, yeah, we don't feel like that's a responsible thing to do. Again, debt only helps the buyer and the seller. It doesn't help the leadership team. It doesn't help the employees. It doesn't help the communities. It doesn't help the regulators. It doesn't help your customers. It doesn't help your vendors. There's all these stakeholders at the table that it doesn't help. But it does help in certain circumstances, the buyer and the seller, which again, if you sort of play short-term games, win short-term prizes, area of scarcity, non-recourse debt, heads I win, tails you lose. There's a lot of incentives to use debt irresponsibly. I think that most private equity firms look at, you know, they're the gas and the bankers of the brakes and they'll just do whatever the bankers allow them to do. And it's sort of up to the bankers to say no. And so our aerospace business, you know, we were.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“And that's what we're trying to do in our business. We're trying to find things that are highly risky because we wouldn't pay the price that we're paying for them if they weren't highly risky, but that we have talents and relationships and systems that we can diagnose what the risks are, properly analyze the probability and the magnitude of that risk, and then work to mitigate it. And that's where our returns come from. The math to me is far less clear that over the long term, debt makes you more money. I'll give you an example of this. We bought an aerospace business in the fall of 2019. I don't know if you know this, Shane, but aerospace never goes down. It's always flat or goes up. We were told by some of the people advising us on that deal. They were like, are you guys, did you guys get dropped on your head as a child or something? Like, you're not putting any debt on an aerospace business. Like, what is wrong with you? Like, this is tons of...”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Or for profit, or government institution, like people are messy. When you get multiple people together, that mess compounds, when you get large groups together, that mess compounds even further. It's exponential. And the volatility of that messiness is tremendous. And so when you get to smaller end of the market, these are for-profit companies that are making between three and twenty million dollars a year free cash flow. The volatility of them is tremendous. And hence the price that we pay is on average less than because we're paying to accept that risk. All investing at the end of the day is the assumption of risk. The ideal investment scenario is you are assuming a risk that is knowable, you are being paid more to assume that risk, and you have some ability to mitigate that risk.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT
“Outside events are really going to not affect them, then they can lever a tremendous amount. And it makes complete perfect math sense. The reality is that the world, I believe, is largely unknown and unknowable. The future is murky. And so it is a form of pride, if hubris, to use more debt than you should. Now, this is very broad. This is like, you know, 60,000 foot because everything's relative, right? How much debt should you use? In the world I play in, we are buying loosely functioning disasters that sometimes make money. I mean, these are small to medium-sized businesses, call it million to $20 million of free cash flow. My general view after looking behind the curtain at thousands and thousands of businesses is that all businesses are loosely functioning disasters, like whether it's a not-for-profit.”
2024-06-11 · The Knowledge Project with Shane Parrish · Brent Beshore: Business Brilliance and Happiness at Home · IDENTIFIED FROM THE TRANSCRIPT