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- 23: Notes To Self
23: Notes To Self
Indonesia, Interested > Interesting, History of PE, Paradox Of Life, T-Pain
Luke Clancy
January 19, 2024
Yo, it’s Luke!
Been cold emailing lots of cool folks recently. And man, let me tell you, people are way more receptive than you think! Don’t be afraid to shoot your shot.
That said, here is your weekly dose of 5 noteworthy ideas & things I learned about last week. Click on each link to dive further on that topic.
1. Mt. Rinjani, Indonesia
Going here with some buddies in May (thanks Tommy). Still can’t believe this isn’t AI generated.
Don’t worry about being the most interesting person in the room, just try to be the most interested person in the room.
The interested person asks about others and leaves a good impression because people like talking about themselves.
The interested person is genuinely curious about someone’s craft and learns a lot about how things work.
The interested person engages with more people and — because opportunities come through people — is more likely to catch a lucky break.
In general, the interested person learns more and tends to be well-liked. And in the long run, it’s hard to keep down someone who is well-learned and well-liked.
The PE market is worth over $7 billion today. That’s a lot of billions. This article explains how PE came to fruition through a few fascinating stories. It was also littered with general business insights that I liked. Here are my notes:
In the early 1908s, William Simon bought Gibson Greetings (a greeting card company) for $80 million. He borrowed $79 million of the $80 million from banks! How? He realized that if he paid a slightly higher interest rate, he could convince lenders to loan enough money to cover most of the purchase price of Gibson Greetings using the company's own assets, brands, and cash flow as collateral for the loan.
Just over one year later, William took Gibson Greetings public at a $290 million valuation, pocketing $66 million on his $330,000 investment, earning 200x his initial investment.
In 1988, KKR lost $730 million on a deal. Their financing was innovative (borrowed $22 billion dollars). But, the company was very operationally mismanaged and the new debt applied tons of pressure (since there wasn’t a ton of free cash flow to cover up the operational issues).
As a result, public companies adopted much better corporate governance. But it took a bit longer until PE firms became operational experts.
In 1994, Morgan Stanley bought a hog company for $500 million. Their idea was to use “private equity to help build companies.” This ultimately would be the model employed by many of the most successful private equity firms. But, Morgan Stanley didn’t execute well & got screwed by a variety of assumptions (namely a volatile market price of hogs).
From it, the industry learned that results are created by exceptional management teams who, with investors’ support, are able to take a long term approach to building their company. Morgan Stanley had neither exceptional management nor a long term horizon, and thus they never realized their vision.
In 1996, 2 guys from Stanford GSB alumni bought a roadside assistance company for $4 million. They built for the long-term & “hired by looking through the windshield, not the rear view mirror.” They invested in talent and capabilities, and they built a durable business with a fantastic reputation. As of 2020 shares, initial investors received more than a 7,000x return on their initial investment (better than people who invested in Amazon’s IPO).
There is one strategy that will work in any and all economic environments: hire incredible people and build great companies for the long term.
The best investment a business can make is investing in its people.
4. A Nice Quote On Life (Derek Sivers)
“Life is not a problem to be solved. It’s a paradox to experience. You can believe one thing and also believe its opposite.”
5. T-Pain Tiny Desk Concert (NPR)
For the unindoctrinated, T-Pain has the smoothest voice in music. The man sounds like Bourban.
No surprise this is the most popular Tiny Desk episode of all time.
Thanks for wanting to know more today than you did yesterday! If you liked this edition, send it over to a friend who would like it too 🤝
Cheers,
PS: Have a topic you think I’d like learning about? Send it to me here.
PPS: Got questions you want me to answer? I made an anonymous form for that.