YouSaid · the spoken record

Will Thorndike

lines on the record: 75
first: 2019-04-30
most recent: 2019-04-30
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“And they very generously kind of, as things went along and returns sort of came in pretty well, they proactively very generously shared economics with me in a way that they didn't have to, and in a way that was just very sort of set a certain tone for the culture of our firm. So I'm very appreciative of that still.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“In the early days of our firm, I had two partners who were primarily investors. They were investors and it was their capital that we were investing. They had involvement in the business, but not nearly full-time involvement. I was full-time. It was a clear division between capital and labor in the group.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Without question, those other categories that you describe have huge opportunities and inefficiencies. But I think it's, again, it sort of buffets circle of competence idea. I mean, I think you really need to know where the perimeter of the circle is in every case. There are investors who really understand the various super high growth. Is very different than what we do and the cyclical levered often troubled piece is also there are lots of people who are very effective investing there. It's just we're not It's”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“If you looked at the generic hundred businesses in the US economy, probably 1 or 2%, as we've refined, as we've gotten known for a certain sort of Deal and the world, you know, we the hundred deals we see, 100 companies we see are pre-selected to have some of those characteristics, so a higher percentage than the one or two percent would make it through the filter, but probably 10 to 20 percent. Still relatively”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Often they're running on QuickBooks still. That has not been the focus in many of these businesses, right? So often the material is pretty rudimentary, but again, if you're really focused on growth and quality of revenue first and then on understanding the unit economics and the margins, and there's sort of these types of businesses, a reasonably straightforward set of metrics that pretty quickly allow, it's one of the beauties of that focus is it's a pretty tight screen pretty quickly you can identify whether something's a fit or not so it leads to early no's which are very, very valuable in any investing business.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“They actually haven't really changed meaningfully. I mean, we like these businesses, growing recurring revenue businesses, basically. And the material that we're looking at is often, again, if you're sourcing things proprietarily, that means you're not seeing... Perfectly produced PPMs offering memoranda. So you're seeing raw outputs from financial systems. And often the financial systems are not”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“That was true. And it's true for the CEOs in the book all found their way over time to shareholder bases that were highly aligned with their differentiated approaches. And that was critical in allowing them to be successful.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's evolved. We have a great group of institutional LPs now as well, but we still have a solid core group of long-term high net worth families and individuals.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Incredibly invigorating intellectually energizing. And the early days, the early days at Housatonic, similarly, were sort of finding, defining a niche that was differentiated in private equity along several dimensions. So sort of this sorts of deals we were doing. We were the first institutional investor to invest in search funds would be one example, but also sort of longer holding periods and proactively focusing on sophisticated high net worth investors who sort of were aligned around Proprietary sourcing, longer holding periods in then a very specific business model, the business model I just described was fun. That was fun.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's an interesting question, so I'll have to think about that. So, the series of conversations that I had with CEOs, so if you had to highlight one, it would be the phone conversation I had with Buffett, but in most cases they were in-person meetings with the CEOs in connection with the book were just fantastic. We had extremely, you know, we went through this very deep analytical process to arrive at a package of material that was successful in every case in having leading to substantive conversations with these CEOs who were generally famously reclusive. So those conversations were just”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Trait, you can no longer check that box here. Multiples have gone up, reflecting the predictability and the lack of capital intensity, and growth has come down. That's a tough combination. So in both cases, we've worked to back management teams we knew well, to look outside the US. Those industries where growth rates are higher and you have the same economic characteristics as it relates to stickiness of revenue and capital intensity.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“In the long term have been the sort of best exemplars of that combination of traits for us have been the records management business, the business that Iron Mountain dominates here in the U.S. and globally, and the Cell Tower business, which dominated. But the public companies here are American Tower and Crown Castle and SBA. And in both cases, we found, and we've been investing in those businesses for 20 plus years in the case of records management and 15-ish years in the case of cell towers. In both cases, the U.S. market has matured over the last five years or so. So the market growth”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, we tend to like, we like three basic economic characteristics. We like curring revenues, so a consistent pattern of repeat business from existing customers. We like growing end markets. So threshold there of a minimum sort of secular long-term market growth of two times GDP. And then we like businesses that aren't capital intensive, and we track that through returns on tangible capital. And we're looking for after-tax returns on tangible capital of 20% or more. As you put all that together, that's sort of our, so the two businesses that”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think its overall valuation multiples certainly fed by active auction processes, but there's a high correlation between overall transaction multiples and availability of leverage. And so this remains a time where There is plentiful debt available for these sorts of transactions. Senior debt financing and layers of mezzanine and salary financing, there's just a lot of debt.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Critically important. And that's the opportunity to develop a differentiated relationship. And so that's as opposed to the sale of an entire company, a control transaction. It's just rare that an intermediary investment banker doesn't get involved in selling those sorts of businesses. Those is involved in those sorts of opportunities. So that's been our experience.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, recapitalization, as I'm using that term, is basically a minority investment, right? So where we would make an investment and own less than a controlling interest in the firm two-thirds of the time in our history, we've been doing control investing through buyouts. About a third of the time we've done minority recapitalizations. And the way those work is we come in and we buy anywhere from 10, 48 percent of a company, often in combination with some relevering of the balance sheet. And then we tend to we partner with the usually founder, the incumbent management team, which is usually a founder, CEO, to continue to grow the business over a longer period of time. We do have historically had somewhat longer holding periods than the norm in private equity. Because it's a situation where the investors are automatically riding with the founder CEO, that relationship with the founder CEO is”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Interesting because they provide more of an opportunity for that sort of long gestation proprietary sourced opportunity with the right sellers.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Conventional wisdom as it relates to the public markets, passive versus active has shifted in favor of passive. And if you're looking for active management and outperformance, you're better off focusing on private equity, right? So there seems to be a lot of dollars sort of being allocated around that. I think long term, the private equity asset class will continue to make sense based on ability to earn a premium to the public markets. But that'll be very That's averaged across a long period of time. It'll be very, very cohort dependent and we're in a very frothy time now so no question about that it's you know we our firm has been pretty significant net sellers for most of the last three or four years and we're very focused on proprietary sourcing and that's just gotten harder and harder to do so we've had to work harder to find new things in our experience recap transactions”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so I think private equity is, as you suggest, is sort of in, it's as in favor as it has ever been among the larger institutional allocators. There's sort of this over the last 24, 36 months, there appears to be this sort of”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't see anything that's a perfect analog, but I do think there appears to be more energy interest, particularly among sort of high net worth family office, sophisticated endowment, sovereign wealth type pools of capital, the more what I would call more sophisticated pools of capital in finding more permanent Permanent capital type vehicles, true evergreen structures, seem to be growing. And I think that's going to be a very interesting category to watch going forward.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Dispersion, but not the level. So the overall level of returns? Appears to be holding, but the dispersion has shrunk. So it's a very interesting and then the number of search funds has exploded. There's been sort of logarithmic growth there in the last dozen years. So it's just fascinating. It's a very dynamic area.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“If you look at the distribution of returns across that portfolio that generated those returns, there's a concentration of alpha in the top decile, top quartile outcomes. But there's some reasons for that. And again, the search fund is 25, 30 years old now as a concept, as a vehicle. And over the last 10 to 15 years, the economic criteria that searchers use in identifying industries and companies has been significantly tightened. And although the data is still emerging, it appears as though the returns data has also tightened.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so our experience and my experience mirrors, so there's a, I would recommend the Stanford business school on their website has a search fund sort of repository of data. And I would recommend going there and pulling down their information. They've got excellent returns data, and it's far and away the most comprehensive survey, and they put it out every other year. And the most recent survey came out, I think, last fall. And what it shows is that across search funds generally, very, very IRRs are very high, mid-30s. But most interestingly, over long holding periods, an average holding period of seven to eight years, so very high multiples of capital.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“And these guys would send a truck to come help you if you had broken down by the side of the road. And at that point in time, cellular penetration had gotten to the point where the incremental users were signing on in many cases for safety and security reasons. So this sort of fit perfectly with that. And so it was a service sold through the channel of cellular companies to their end subscribers, and it was sort of a $3 a month charge embedded in a $60 a month cellular bill. So it's a recurring revenue stream attached to cellular penetration starting in about 1995. And they've branched off of that into other businesses, their largest business now is handset insurance. They're the largest provider of handset insurance here in the U.S. They've done a phenomenal job over a long period of time.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“What it looked like then was it was a provider of roadside assistance services through cellular phone companies to their end subscribers. So, you know, you would hit star help on”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Our first search fund investment actually was in a company called Assurion, which is just completely by absolute happenstance the most successful of all the search funds. It's been a wildly successful company run by a very talented CEO who was a classmate of mine in business school, a guy named Kevin Tewil. So that was actually our first one, and we still own some of our original shares there. We've sold a number of them, the majority of them over time, and some recapitalizations, but 20 coming up on 22 years later, we still own some of our shares.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“We're quite good from that. And then as our fund sizes grew, it got harder. To invest in search funds, which tend to intentionally focus on smaller transactions. So I began to invest personally in them, and I've been doing that for 15 plus years now.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“I went to Stanford Business School and graduated in the early 90s and search fund idea was really invented and fostered shepherded by a professor who started at HBS in the mid-80s and then moved to Stanford to the GSB where he's been for the last 30-ish years. His name's Irv Grossbeck. So I had exposure to Irv when I was out there and when I was tapped to start Houstonic Partners, the private equity firm very early on, I realized this was a potential differentiated source of deal flow for us because what search funds do is smaller growth buyouts. That's what those transactions are. And so we were involved very actively for the first eight to ten years of Husatonic's existence investing in search funds because it was a proprietary source of deals for us. And that was a very productive activity. Our returns were”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“He read some early material in the late 60s. So he was running, we were running when I was there in the early 80s, a offense that would, you know, in the early 80s where there were probably five places in the country running it. So he was just ahead of it. And it was suited to the small, wimpy people he had playing on his team, but he got great results. And he was just a very talented guy. What I find is it's interesting to write, if you're trying to figure something out, that's the intellectual sort of engagement part of it. It's fun to try to solve an interesting problem and then to write about it.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So it's a combination of things, but he was ahead of his time strategically, would be one thing. So he was running a, I can go into detail on this. He was a pioneer in running the run and shoot type of offense, which is now widely popular in the NFL. But he was running that.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so I'll give you an example. I wrote a short article on a... High school football coach. Who had a phenomenally talented high school football coach who had extraordinary results with very poor material? What made him so talented?”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I don't have a. I mean, what I found is I had never written anything before, and this took me a very long time, so slow writer, but I really enjoyed that process. And so I don't have a clear answer. Patrick, there's nothing right now that's Find that process invigorating, and I look forward to finding other things to write about. And there's some business things I'm interested in. I'm not sure there are book projects, probably more in the form of articles, and some non-business things.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, so that was wildly surprising and dramatically dramatically exceeding any expectations certainly that I had, or that the publisher had. So it's just been a very fun for me personally since the book came out. The most fun thing is that it's led to a lot of interactions with really talented investors. And through them with some very interesting CEOs. So much more than I would have anticipated. So that's been really fun. I've really enjoyed that enjoyed that quite a bit. And then there was something else embedded in your question that I'm...”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Asset managers too for sure. And this group, as a group, actively Actively disdained investor relationships. Allocated substantially less time to it. In some cases ignored it completely. And in every case they were unconventional in that regard. So they spent less time with Wall Street and the business press than their peer group did. And that freed up time that they could allocate in other ways that they believe created more value. So I would kind of group the COOs and the IR approach together in sort of this management time allocation prioritization bucket where again I think that a differentiated approach.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Who were responsible for overseeing these intensive budgeting processes we talked about in running the operations? So that piece could be sort of bulletproofed. And that freed these CEOs up to focus on capital allocation and longer term projects. The other area was investor relations. So depending on what study you look at, in the US now, typical public company CEO spends somewhere around 20% of their time on IR. In that ball”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, that is a common thread across the eight CEOs in the book. They all had very strong operations-oriented number two COO types, common threat across the group. And I would say more generally, it relates to, so if you're looking at the resources you need to allocate as a CEO, we've been talking about capital, which is a primary, obviously critical resource, but there's also sort of human resources, and this group shared an approach to that, which was these highly decentralized organizations Very thin corporate headquarters and responsibility distributed out into the operating units. And then is it related to their own time? Another scarce and valuable resource. They were very disciplined about how they allocated their time. The two common threads there were one, the use of these very strong COOs.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so that I would be looking for a niche insurance company that had a history of sub 100 combined ratios, strong float generation run by somebody who understood how to allocate that float in an advantaged way. So that would be my first default choice. So if the question specific to John Malone, I'd probably give John Malone, I would love to see what John Malone would do with a cellular tower business. Which has these wonderfully predictable long term cash flows that had a mandate outside the US where you had sort of a combination of organic growth and that predictability of cash flow and just watch him Go to work.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Is this what I give John Malone? Okay, so I would go back. If you said, what business from today I would... I'm holding Malone aside. Again, I think it would be hard to, the insurance business has some real advantages, right? So if you have... Insurance business run by a CEO who really understands the value of underwriting profitability and float generation and then as a talented investor, that is really powerful over long periods of time.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“And prudently aggressive use of the balance sheet. So across those three factors, and you just, and as with all these CEOs, Catherine Graham being, you just know the probability of bad decisions is very low. So it's a dynamic where if they announce an acquisition, overwhelmingly likely that's an accretive positive thing. Not true generically of public company CEOs. If the stock gets hit, It's almost relaxing because you know If it gets hit and the IRR is attractive from purchasing it at the new lower level, they're going to purchase it aggressively. So just the, in kind of all of those pieces, Malone, some active repurchase serve shares, as well as an active acquirer as well. So he kind of has... He's sort of uniquely suited to optimizing per share price over a long period of time. So that's tough. It's a horse race.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“What makes Milan interesting is that he kind of, I mean, again, in answering this question, so that, yeah, that doesn't, I mean, he's a super talented and he is my answer to that question X Warren Buffett, but he just everything about his approach He is the other high level mathematician along with Singleton in the group, and he came out of an operations research, electrical engineering, then an operations research background. So everything in his training was geared towards optimization, optimizing the signal through the noise or output for any given amount of input. His entire approach as a CEO is the same way. It's the factor you mentioned, it's the discipline around acquisitions combined with Unbelievable acumen on tax minimization? And I think it's hard to underweight that if you're talking about a 20 year holding period.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Optimization. So you're optimizing the compound only It would be a horse race, but I would probably go with, I'd probably pick John Milano.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, because of the float. And so if you have someone who really understands that and combines that with unique investing ability, it's really hard to beat that as a compounding machine. So if you had Buffet with his known abilities and his abilities were known, like he had the Buffett partnership record in place, the vast majority of it by the time he took over Berkshire, the first 10 years of it anyway. It's very hard to beat that standard. I mean, he's an incredible, unique genius, and he found a unique vehicle that was uniquely leveraged to that genius. So that's a hard, so I'm going to kind of hold buffet aside, because I think he's, I think, it's a good question. I think it gets a little trickier. And then I think outside of Buffett, if your goal, if your sole goal was 20-year per share.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So let me ask, I get to ask a question back here, a clarifying question. This is at the point in time that they began their career as a CEO in the book. Is that right? Right. Okay. Are we talking about so while that's a difficult question, but a good question, so I'll focus, I'll do the CEO piece of that in a minute, I got to think about it. But then on the business question, that is from today looking forward. Correct. Correct Also, an interesting question. Okay, all right. So let's see. I think. It's a really tough question. There are some Unique advantages structurally to insurance businesses as compounding machines, right?”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“knew the level of leverage that their businesses could comfortably support across a business cycle. And they were clear with investors. Markets generally about where those levels were, and then they adhered to them But they all use leverage.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Equity investors, public markets, debt providers, that that was the band. To this day, you can look at all the liberty entities, and in almost every case, they have told you the exact band they're comfortable with. And they're very clear about where they think the right level of leverage is. They'll typically be a little more aggressive in their use of leverage than the other players in their industries. That's true in cable here in the U.S. The charter, which is now Liberty Entity, effectively, will run at a higher level of leverage than Comcast does. That's been true for 30 years in Malone Entities versus Comcast. But they're very clear about that. That was true also for Dick Smith at General Cinema. It's just very clear he was going to run the business between three and four times cash flow, again, defined as EBITDA. In his case. So in each circumstance, there was the CEOs knew their business as well and felt that they...”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So basically, all of them, again, Buffett is a bit of an exception here, although we talk more about that. But basically all of them used leverage pretty actively. And they all believed that there were real benefits to the tax shield that debt provides, and that there were just all of them, the pattern tended to be they would based on the economics of their business and cable being the most predictable utility-like business of the aid in the book. Malone looked at that and he said, you know, given that, we believe the right level of leverage is four times cash flow. Cash flow in the cable business defined as EBITDA by Malone, who invented that term. He consistently ran his business in that, but he was very clear”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“And that every single station manager in the history of the company from that point forward was told that story before now, he didn't economize on air talent or the quality of the production equipment, the things that actually went into getting ratings, but everything else was run lean. It had to be rationalized.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's exactly the same thing. I mean, there's this great story from Tom Murphy's earliest days at Capital Cities where he got sent out by the largest investor at Capital Cities to go run their one TV station in Albany, New York, which was located in a dilapidated former convent. So the guy sends Murphy out there and he says, listen, Tom, you go out there and you run the station. I'm going to leave you alone. You figure out how to make it profitable. The only thing that I'm going to ask you to do is to paint the building because it's an embarrassment. No local advertisers are going to take it seriously. So, you know, Murphy's response famously was to paint the two sides facing the road.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“The network business was a business where the TV station business, I should say, The 70s and 80s was an unbelievably good business. It had exceptional economic characteristics. And so even mediocre operators with lots of extra costs were very profitable. And so capital cities just really knew how to run stations super efficiently, which didn't mean they actually did that while investing significantly in the on-air content, the on-air product. But they basically ran everything else. Lean, and they were able to reduce headcount very significantly.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“TV station business that ABC owned, which we're about, they were operating at about a 30% cash flow margin, and take them up to the median margin for the capital city stations. It was about 50%. Operating Martian. So 20 margin percentage point 2000 basis point and proven of margins and they were able to do that in about two and a half years but the whole deal rested on that and it was they had a very specific series of things that they knew they would be able to do to improve margins but as a result they were very comfortable making a very large bet which they financed predominantly with debt”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source