My Conversation with Tracy Britt Cool

When I was CEO, what I felt like was it was very lonely. It was challenging. It

was hard. I was out navigating and trying to find resources, support.

People would come before me who could help me in that seat. Tracy Brick Cool is the co-founder of Camdrick, a long-term investment partnership focused on building enduring businesses. She is best known for working directly with Warren Buffett at Berkshire Hathaway where she served as his financial

assistant before becoming CEO of Pampered Chef and serving on the board of several Bergkshire companies including Benjamin Moore and Craft Hind.

She combines investor discipline with hands-on operating experience, bringing a rare perspective on what it takes to grow and sustain great companies. We

only invest in one or two companies a year. We'll look at 500. So, we're

really selective at finding the highest quality businesses that have a long runway. I also think a lot of investors haven't actually been operators and so

runway. I also think a lot of investors haven't actually been operators and so it's really hard to go into a business and say this is what you should go do to operate a business if you've never actually operated a business.

When it comes to hiring like what does that process look like? Like what does that nitty-gritty look like in the details? We very much describe the who process.

So by GHS smart um there's a book called who WH it is I think single-handedly the best simple book on hiring and there's a few components to it and we've augmented and added our own but the first is building a really in-depth scorecard for

the role and so a good scorecard in my our mind has three sort of critical components the first is the second is and then the third are members get access to an extended version of this conversation that goes further into frameworks definitions and

strategies ies Tracy uses to build lasting companies. Sign up today at fs.blog/membership.

This episode of the knowledge project is forformational purposes only. The views

and opinions expressed by Shane Parish or our guests are solely their own.

Nothing in this conversation should be considered investment advice, financial guidance, or recommendation to buy or sell any security. Always do your own due diligence or consult with a qualified financial adviser before making investment decisions. It's time to listen and learn. Tracy, welcome to the show.

Thank you. It's an honor to be here. I appreciate it. I want to start with what you're reading recently. Yeah. So, on the biographies, I just read Melinda Gates transition book that

recently. Yeah. So, on the biographies, I just read Melinda Gates transition book that she just came out with uh not too long ago, which I thought was super interesting. Reread Alvin Lolli's um you know, American icon, which I think is

interesting. Reread Alvin Lolli's um you know, American icon, which I think is fascinating in terms of a turnaround and the impact of that. Recently reread

Katherine Graham's autobiography. Yeah. So do I. Yeah. It's so amazing. So that's been my focus and where I've found the most interest recently. And then also several books on parenting. So the anxious generation obviously a lot of people are

talking about, but that has spawned me going down a path on reading more about kids and freerange kids, books like that of how to think about parenting and sort of this new world.

How many kids do you have? We have four. Oh gosh. Okay. What are the ages? 10, seven, five, and two.

Okay. We had Allan on the show. I'm curious what you took away from his biography.

I thought it was single-handedly the best book in navigating a turnaround.

The time in which he did a turnaround in the business, how challenging it was, the landscape in 2008, 2009, Ford, you the auto industry, I mean really, really

challenging and just the discipline with which he did it. everything from, you know, his team coming in and with green every week, even though, you know, he was trying to get them to celebrate having reds in the business and the

challenges and how to learn from those and making mistakes is okay. Uh, so I really appreciated that insight and just how he did it. Having done a turnaround at a much smaller scale, I was incredibly impressed with his focus on

people, his focus on discipline, his focus on building a culture of continuous improvement, learning, making mistakes. I thought that was just really eye opening and just how he did it in the backdrop of the time that he did it.

One of the things that he mentioned that still sticks with me to this day is he laid out his operating philosophy and then he said, "Well, if you're not partaking in that, you're choosing not to be a part of our team." And I thought that was a really interesting way of putting it back on the person that

they're making a choice whether they want to be part of the team or not.

Yes, I couldn't agree more. I think when you're in a company and you set a culture and expectations and an operating system, then you say to your employees, you is this what you want to be part of? And if not, we understand that and you can choose to lead the business, but if you want to stay here,

you need to get on board. When I was CEO, we were going through transformation. And I said to our team, uh, often they almost told me to stop

transformation. And I said to our team, uh, often they almost told me to stop saying it was, if you're not having fun 4 days out of five in this new culture and environment, it's probably not right fit for you. And we encourage you to move on. We'll promote you to customer, whatever it may be. I think you want

move on. We'll promote you to customer, whatever it may be. I think you want your team to be really committed, engaged, focused on driving the results, but also that it resonates with them and they care about it. And the turnaround you're talking about is Pampered Chef. Can you walk me through that? What was that like?

It was really interesting. So, I took the role at Pampered Chef having no prior experience operating a business. I had been at Berkshire for about 5 years.

I really had a view that the investing landscape was shifting and more value would be created going forward on the operating side, but that very few investors actually have operating experience, especially on the more buyout side. You see it more in venture, but less on buyout. And I thought I'd be

buyout side. You see it more in venture, but less on buyout. And I thought I'd be a better investor if I went and got out of the boardroom, got into the war room, and actually went and operated a business. So decided to become CEO of Pampered Chef. Pampered Chef was a business that was in need of

Pampered Chef. Pampered Chef was a business that was in need of transformation. It had been in decline since Berkshire bought it for about 10

transformation. It had been in decline since Berkshire bought it for about 10 years. and the um fundamentals were intact. It had a really strong brand and

years. and the um fundamentals were intact. It had a really strong brand and a strong channel. So the moot was really there uh in terms of the business but it had lost its way. not dissimilar from a lot of es and flows of consumer

businesses where you grow but your customer changes or the world changes and in that case the world had changed quite significantly and the internet had come along in the early 2000s which had fundamentally shifted the business and

then the customer started shopping differently you shopping online um Pampered Chef was originally started 45 years ago now by Doris Christopher in the basement of her home to really solve this need of providing highquality

kitchen wear products uh to families you around the country through a direct sales model. So there were consultants who sold the products. So in you 2015

sales model. So there were consultants who sold the products. So in you 2015 or 14 when I took over um it had 10 years of decline. So it was a interesting opportunity to come into a business that was in need of

transformation where there was this opportunity to rethink the business model, rethink the approach but I had never done it before. So it was a fundamentally new role for me to take on in an industry I didn't know. Uh

ironically I don't cook so I had to learn the basics but it was a really great opportunity to do that. There's two things you said there that are really interesting to me. One of which was value creation moving from investing to operating. Tell me more about that. I think for a long time in

the investing world on the buyout side what you saw was there was opportunity to buy businesses at 7 8 nine times and then you know a few years later some minor improvements sell them for 10 11 12 times I think that that has shifted

because capital is now commoditized there's a lot more capital available to sellers than there ever has been. For example, in the 1980s there were you 20 25 private equity firms. In 2020 we got close to 20,000 in the US. So

significant shift in terms of the capital that was out there as sellers rightfully so gaining more of that value when they're being partnered with that means you have to create more value after the partnership starts and that

means more of a focus on operating. Traditional private equity the focus is very short-term. You know, you buy a business, you're focused on selling it

very short-term. You know, you buy a business, you're focused on selling it three to four years later. And in doing that, I think what ultimately happens is you make short-term decisions about the businesses. And if you're going to really create long-term value, I think there's a value of having a longer term

approach. When I wanted to go become an operator, it was I know I'm going to

approach. When I wanted to go become an operator, it was I know I'm going to need to create value in companies once you partner with them. How do I think about that and how do I become a better operator? It'll make me a better investor. I want to go back to something you said earlier about the changing

investor. I want to go back to something you said earlier about the changing landscape and companies not adapting. Is it complacency? Is it they're running the business on a map that's outdated? Like why is it companies have a hard

time adapting to reality? I think there's a few reasons it happens. One is I think change is happening faster and faster than it ever has. And it's very hard when you're managing a business and you're focused on your customer and you're focused on your product or your service to also focus on this outside world and

landscape. You have things like COVID tariffs, supply chain. there's always

landscape. You have things like COVID tariffs, supply chain. there's always

something happening now AI what does that mean for your business and how do you navigate it it's also a lot of false starts you don't know is this one here to stay or is this something that's going to be gone quickly and I think as a leader that's challenging to navigate I think second is if you think about

most leaders they usually grow up in a business oftentimes and when you grow up in a business you become an expert in that business in that field in that industry but sometimes you don't have the perspective of seeing other industries that perhaps perhaps have come before you that are different but

similar in terms of what happened and so you lose some of that perspective. You

gain the depth of experience but that perspective is harder to have and I think for us is like how do we help leaders think about that and help them see around the curves that might be challenging but I think those are a

couple of reasons that it's becoming more difficult for leaders. Let's go back uh all the way to the beginning. You grew up on a firm in Manhattan, Kansas. Is that correct?

beginning. You grew up on a firm in Manhattan, Kansas. Is that correct?

Yeah. When I went to college, people would often say, "Where are you from?"

And I'd say, "Manhattan." Because that's what you say in Kansas. And people

started ask like, "Oh, are you from the Upper East Side or where?" I'm like, "Well, there's not really an upper east side." And I quickly realized Kansas was sufficient and saying where I'm from because most people don't fully appreciate there's another Manhattan that's much smaller. What are some of the lessons you

remember from growing up on the farm and the responsibilities that you had at such a young age and how you think about that in relation to parenting now? I

joke I spent much of my life trying to get off the farm. And now I want a farm for my own kids because I think it's such a valuable landscape to learn and to learn work ethic and commitment and problem solving, all the things that come with with being on a farm. My dad, you know, he owned this farm and he

loved it. And so the first lesson I learned when you find something you

loved it. And so the first lesson I learned when you find something you love, it really is a passion and something that you enjoy and you're not really working. My dad worked harder than anyone I've ever seen. You know,

really working. My dad worked harder than anyone I've ever seen. You know,

late at night, early in the mornings, all summer long, all throughout the winter, he took a small break, but that was about it for him. And it wasn't working. It was what he loved. That passion was something that I recognized

working. It was what he loved. That passion was something that I recognized and saw early on. Second, I learned a lot of independence on a farm. Just the

nature of it is you're figuring things out. There's a lot of inherent dangers or risks. I was driving when I was, you know, 11, 12 years old on the farm, not

or risks. I was driving when I was, you know, 11, 12 years old on the farm, not necessarily on the road yet, but I learned how to navigate unfamiliar situations, which was an important lesson for me early on. And then I also

learned, you know, in essence business from a very fundamentally young age.

When I was probably in third, fourth grade, I started running my own farmers market stand. And so my dad would take me down in the morning, drop me off, I

market stand. And so my dad would take me down in the morning, drop me off, I would run it for the day and he'd come pick me up at the end of the day and we got really busy and I started hiring my friends and I got a practice. Do I pay them by the hour? Do I pay them a commission? Do I pay them a bonus? How

do I get the best, you know, um, performance out of them? I started

thinking about supply and demand and pricing. I saw as we grew watermelons, beginning of the season, they were $8 each when they were very limited. By the

height of the season, when we had a lot, they were $2 each. Learning fundamentals

of a business was really valuable. Even if it was a farmers market stand, I could get better and better every week. I could build the foundation of how to have a, you know, repeatable, scalable system to improve my odds of success.

And I saw our farmers market stand going from making $500 a week to a,000 to,500 by the time, you know, I had really scaled it up. Uh, which was great for me and really just a fascinating learning experience. Was this your parents

helping you or all self-driven like reading and applying or? Yeah, definitely self-driven. My dad um I was the youngest of seven kids. He had been married previously. So, four from his first marriage and three from from ours. And what I saw in that was like he

just let me he let me do a lot. Um probably more so than your average kid because he was older and he had seven kids and he had sort of seen it all. And

my brother navigated sort of the farming part of the business. That wasn't my passion, but the business side I did love. And so it started out small, my own farmers market stand, but over time it was running our whole store and running more and more of the business. And I think he appreciated it. It wasn't

my dad's passion either. He loved the farming side and it was an opportunity to really learn and grow and try different things in a relatively safe space, which is really amazing. Where did the ambition come from to go to Harvard?

It wasn't um as structured or as disciplined as I would have thought. I

knew I wanted to leave the farm and as much as I like the business side, it was hard. It was very, very hard manual work and I wanted to get off the farm and,

hard. It was very, very hard manual work and I wanted to get off the farm and, you know, go do something else. I didn't know what that something else was, but I knew I wanted to leave. In high school, decided education was the way to get

there. And I had always had good grades and done a lot of extracurriculars and

there. And I had always had good grades and done a lot of extracurriculars and managed a lot on the farm, but I wanted to apply to a lot of colleges. And I

didn't know which one. I didn't know where. I just knew I could apply to all these schools and I probably could get into one or two that I'd be interested in going to. So, I just sort of applied everywhere because I didn't know anyone

at that time who had gone to Harvard or other schools. I mean, really outside of Kansas. And so, it was a great opportunity for me to just put my hat in

Kansas. And so, it was a great opportunity for me to just put my hat in the ring and sort of see what would come from it. And then you immediately went to HBS after. What was the decision-m process like to just do an undergrad and then

after. What was the decision-m process like to just do an undergrad and then right into HBS? You knew what you wanted, I assume. I think there were a couple components. One is I had a mentor who had done something similar a

couple components. One is I had a mentor who had done something similar a different school and she had really advocated if I knew what I wanted to do that it was a path that allowed more efficiency and also not having to you revisit it later in life. At that stage I had found business. I had found

investing. I knew I was passionate about those areas. I felt like I had a clear

investing. I knew I was passionate about those areas. I felt like I had a clear direction of what I wanted to go do. I also think going straight from college to business school which I advise to students now is you really on three metrics. So, you need to make sure you're ready. Socially, you're going to

metrics. So, you need to make sure you're ready. Socially, you're going to be with students who are much older than you are on average. Academically, can

you bring something to the classroom that's valuable and insightful? And then

career-wise, you're going to be competing for jobs with other people who have more experience than you. Socially, I'd always felt, you know, like I was older than my peers. I think the nature of growing up again in in a farm or a family business is you often times just get more independence and you age a

little bit quicker. Second, I think in terms of academically, I hadn't been in a traditional career, but I had run our family business from, you know, a young age. And so, I felt like I had experiences to draw from that would help

age. And so, I felt like I had experiences to draw from that would help me in in the classroom and be relevant. And then third, from a career perspective, I didn't know where it would go, but I felt like I'd figure it out and I wasn't as worried about that. That wasn't what I was going to business

school for. it was to to learn and grow and become a better person in terms of

school for. it was to to learn and grow and become a better person in terms of my own expertise and skills. And then when it came to finding a job, my understanding is you wrote a whole bunch of letters to different CEOs. Tell me about that.

I actually started writing letters in college to CEOs and I just wanted to learn. So I wrote letters to different CEOs in business and in finance saying,

learn. So I wrote letters to different CEOs in business and in finance saying, "Can I come and pick your brain?" I wrote a letter to Ace Greenberg at Bear Sterns and he graciously said, "Yes, come down and visit." And so I came, went to the trading floor, sat with him for a couple of hours, and he just

answered my questions as I thought about investing. He was, you know, obviously a legend in the finance field, but he was gracious and willing to spend time with me. And I think that was a huge lesson for me because people want to help other

me. And I think that was a huge lesson for me because people want to help other people and they especially want to help young people. Being a student, I was able to get access to people who otherwise probably would have said no, and they probably should have in terms of their time. They were very busy, but

it was a really great opportunity. I'd written one of those letters to Warren Buffett to bring a group of students out to Omaha in college and got to know him a little bit through that. I wasn't actually writing letters for jobs. I was

writing letters to learn. And then when I graduated, I had a full-time job lined up. I had been an intern and then come back full-time at a company. When I met

up. I had been an intern and then come back full-time at a company. When I met Warren over the student group visits, I decided to write him a letter. Um, and

so that's how I ultimately ended up at Bergkshire. What do you take away from Bergkshire?

You worked there 10 years, right? I think Warren is very gracious with his learning and his knowledge and he shares it widely. He shares it at the annual meetings. He shares it at the annual letters and I feel like I got a front

meetings. He shares it at the annual letters and I feel like I got a front row seat to really understanding that and seeing it in action. But I think the lessons are timeless and they're what he exposes relatively consistently through those maxims which I think is great because everyone can learn from him. But

really the value of long-term thinking and long-term compounding, the eighth wonder of the world is compounding and the value of that and if you think long term and are set up structurally to think long term, there's a lot of value

in that. Second, the value of people and finding the right people with high

in that. Second, the value of people and finding the right people with high integrity, people who care about what they're doing and then giving them the right incentives and the right encouragement. Warren gave those people

around him, his CEOs or others really great autonomy and high expectations but really let people have flexibility and I saw the value of that. And then lastly just the value of continuous learning improvement. You know Warren reads every

single day get smarter is better. Those in the Birkshire ecosystem do the same.

And I think that was something that resonated with me from when I was a kid on the farm. You know, my dad also focused on getting better and continuous improvement in a different field, but it was something that I saw reinforced at Bergkshire.

So, why leave? Bergkshire is a phenomenal place. I mean, it's unique. It's one of a kind. I

don't think there'll be another one by any means, but Berkshire is very large in terms of capital. It's hard to deploy capital. It's hard to find really great investments, but it's also especially hard when you're very large. I saw this

opportunity to help midsize companies with a long-term approach with creating value. As much as I love my time at Bergkshire and would have been happy

value. As much as I love my time at Bergkshire and would have been happy there forever, felt like there was this opportunity to create something new and special that was serving a market that really wasn't I didn't think being served well today.

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Compare and contrast the framework at Bergkshire and what you're doing that's different.

It's hard to say what's similar in the sense because Bergkshire is so unique and special. It's one of a kind and I don't think we think that we're going to

and special. It's one of a kind and I don't think we think that we're going to to replicate that by any means. What we're trying to do is really focus on long-term creating a long-term structure with a long-term horizon to buy and

build businesses with the right approach that we think is valuable to the companies, valuable to employees, customers, and ultimately investors.

Second is finding highquality businesses that have some sort of mo or competitive advantage. Great businesses are hard to find. And when you find a great business

advantage. Great businesses are hard to find. And when you find a great business with a motor competitive advantage and you have a long runway, you can really invest behind that. And then I think for us in terms of one thing that we do distinctively different than Bergkshire is we're much more hands-on

operationally. And that came from when I was CEO. When I was CEO, what I felt

operationally. And that came from when I was CEO. When I was CEO, what I felt like was it was very lonely. It was challenging. It was hard. And I was out navigating and trying to find resources, support. People would come before me who

could help me in that seat. And I kept thinking like it would be so nice if there was someone who could tell me how to do a great strategic planning process or how to improve my hiring skills or how to build the right culture or what

is great look like in these different aspects of managing a business. And so

when Brian Humphrey and I started Camrich, we really wanted to focus on how do we build a system that we can help these midsize companies and be the resource that we wanted when we were operators. We built the Camber business

system really focused on that. There's so much to unpack there. I want

to go back to maybe the first jumping off point there, which is long-term.

Everybody says long term that's become this sort of thing that's easy to say and what's the difference between saying it and living it. I think of it in three different ways.

One is do you think long term? Do you have a long-term horizon in perspective?

A lot of people can say I think long term and they may, but that's only one component. The second is, do you have a structure that actually allows you to

component. The second is, do you have a structure that actually allows you to think long term? Because if you naturally have a structure that doesn't allow for that or doesn't encourage that, you're going to be pitting yourself with your long-term horizon against your structure that is going to

encourage you to make shorter term decisions. In essence, if you're focused on selling a business in three to five years, you're going to make short-term decisions if your structure is going to require you or incentivize you to do

that. And then the third is I think there's differing degrees of long-term.

that. And then the third is I think there's differing degrees of long-term.

There is the 50-year long-term which I think is really really long-term and then there's differing gradients of that that can be utilized and be thought about and I don't think all long-term is equal and I don't think you need to do

50 years um to be sort of long term. I think there's some in the the middle that allows you to take advantage of that horizon, take advantage of that structure, but give you some flexibility where you're not locking yourself up forever.

Even if you're a long-term thinker, it's kind of weird, right? Because you're

thinking about longer duration, 25 or 50 years, but you have to act today.

Yes. We always say that there's a balance of sort short-term and long term. You can't only think about the long term. If you only think about the

term. You can't only think about the long term. If you only think about the long term, you probably won't get out of the short term because you're going to miss the situations of today, the shortterm um sort of dynamics. When we

were at Pampered Chef, we were turning around the business. Uh Brian was the CFO, I was the CEO, and we had a management team that was helping us drive this transformation. And we were a couple years into the turnaround, and the business was actually doing quite well. And then in year three, we had

this sort of setback. And what we saw was we were focusing too much on the long term. our long-term strategic initiatives, our investments in the

long term. our long-term strategic initiatives, our investments in the international growth and new categories. We had lost sight of the fundamentals blocking and tackling of today. And what we had thought was, hey, we had focused

on those for two years. We had improved them. Now we could go set our sights on longer term thinking. But the reality is you have to manage the short term and you have to manage the long term. And I think for us is we had to refocus really

work on the sales today, the sort of challenges we were facing in the moment in order to give us the space to think about the long term as well.

You mentioned blocking and tackling and I think there's a point to be made there perhaps about how we get trapped in complexity and making things overly complicated and sometimes it just comes down to remembering the basics. As as

Munger would say, take a simple idea and take it seriously. Yes. Yeah. I mean, I think that often times we think of the big things we could go do, you know, what should the strategy look like or what's the future vision of this or what's it going to

mean versus how do we do the fundamentals and do the fundamentals well and I think some of the best you CEOs out there focused on the fundamentals. I mean Sam Walton at Walmart, he was all about the

fundamentals. I mean Sam Walton at Walmart, he was all about the fundamentals and he was in a store every week and you know multiple stores every week focused on how do we deliver for our customers more effectively. That is

a really important skill set that is oftentimes undervalued or underappreciated. And I think that's really important especially in mid-size companies where there's a lot of blocking and tackling to be done every single day. And often times that rises

all the way up to the management team and the CEO. It's not something where just your front line can handle the blocking and tackling. Really, everyone

needs to be focused on it. Was the turnaround at Pamper Chuff with the same people or was there a changeover in a lot of the team? In this situation at Pamper Chef, we did change much of the team. The business had been in decline for about 10 years. And

during that period, we saw a lot of probably great people in the organization leave or they had the skill sets that we needed for the transformation weren't there or had atrophied. And so, we needed an infusion

of talent. So, as an example, when I started at Pampered Chef, 10% of the

of talent. So, as an example, when I started at Pampered Chef, 10% of the business was digital. 90% was sold in person through in-person parties.

Employees didn't even have laptops. And what we saw was, wow, the customer is shifting dramatically. They're shopping more online. They're shopping more

shifting dramatically. They're shopping more online. They're shopping more mobile. And we're selling through an in-person party model. So, we needed to

mobile. And we're selling through an in-person party model. So, we needed to shift our mindset to say, okay, how do we actually meet customers where they are and what's important to them in that process. And what we found in doing that

was we needed to be more digitally focused. And we needed to shift our own thinking about technology from back office and support to a true revenue generator. And so we needed a you a new leader in technology and then ultimately

generator. And so we needed a you a new leader in technology and then ultimately much of a new technology team and marketing and sales to really complement that. We brought in a new leader who really transformed how we thought about

that. We brought in a new leader who really transformed how we thought about technology and then how we serve the customer. We took the business from 10% sort of digital to 75%. Now we still did that through the channel. So through the

sales consultants, we didn't go on Amazon or you sell direct, but we actually really focused on how do we utilize our you competitive advantage which was the channel but help them be more effective digitally. But I think it's a good example of sometimes you need a different skill set or a

different experience to go where you need to go in a business and sometimes the legacy team doesn't always have that. What was it like attracting talent to uh declining business? And I liken this maybe to sports, right? If you're on a

declining business? And I liken this maybe to sports, right? If you're on a team that's 0 and 17, it's really hard to attract free agents that are capable and competent and who can change the culture. They're sort of waiting to see

progress before they jump in or waiting to see a critical mass. How did you go about attracting talent to that? It was something we really focused a lot on early on, understanding what was our employee value prop. Why would someone

want to come to Pamper Chef? And what we found was people weren't coming to Pampered Chef, you know, because they necessarily loved always loved the product or our location or some other factor. They were coming because they wanted to learn and grow and we could give them opportunities through being a

meritocracy that they could learn and grow more quickly and get rewarded for that and be excited by what we were doing. And in essence, you know, we really focused on storytelling and saying, what are we going to go do and we're transforming a business? We're going to reinvent meal time. we're going

to focus on our purpose which was imaging lives one meal and one memory at a time. That's what we're going to focus on. And that really started to resonate

a time. That's what we're going to focus on. And that really started to resonate with sort of employees who were passionate about learning, growing, and then doing something that was unique and special. And then we focused on our

culture of how do we actually accomplish that through the culture we were creating both in terms of opportunities, promotions, incentives, growth, but also in terms of engagement, giving feedback, helping people grow and develop. And we

ended up attracting a lot of people who wouldn't normally go to a kitchenware products business. I wouldn't normally go to a kitchenware products business,

products business. I wouldn't normally go to a kitchenware products business, but saw this opportunity to build something unique and special and really focus on how could we do that here in the company as well. I love that. I want to go back to

structure being a critical important to long-term thinking. I've always, as an outsider to Birkshshire, thought a lot of the success resulted from the fact that nobody could come in at certain point in time and tell Buffett to do something different. The structure aligned with what he was doing for a

something different. The structure aligned with what he was doing for a long-term thinking point of view. And we have a mutual friend, Brent Bash, who set up the same thing uh from a wouldn't call it a private equity model, but he

didn't take a seven-year fund where there's a ticking clock. He made it 28 years and called it permanent equity. And that enables a lot more patient deployment of capital, enables you to make investments today that they're

going to bear fruit in five or six years, but you won't do that if you're just flipping a business.

Absolutely. I mean, I think that if your time horizon is you 3 to 5 years in a business, you know, I'm going to sell the business in 3 to 5 years, everything you're going to do is going to be short-term in nature just because of human nature and what how you're incentivized. So you're going to come in

and say, "Okay, should I invest in growing into new markets or should I take price right now? Should I, you know, really build a strong people system and culture and engagement that may not pay back for 3, four, 5 years or should I take costs out right now which are going to increase my short-term

value?" Every decision you're probably going to come up to, it's going to be

value?" Every decision you're probably going to come up to, it's going to be really, really hard to make a longer term decision because the pressures are so, you know, skewed to making a shorter term action. And so I think that the

nature of the structure just creates the wrong incentives. Any leader in a business will say you you don't usually get payback and things as quickly as you think. And so to get payback in a year or two years or three years, it's hard

think. And so to get payback in a year or two years or three years, it's hard versus okay, we're going to move into a new market. You know, that might take us a few years to get that set up or we're going to invest in building a new crop of talent in our organization so that they're ready to lead in five years.

Those are things that are long-term in nature. But if your structure or your incentivized on a shorter term duration, it's just hard to make those decisions.

And even when you make them, it's hard internally often unless you have everybody aligned in the same direction because it's like, oh, we're making this for 5 years, but all of a sudden the ROI is not what we thought it would be. And

abandon ship sort of mentality. Oh, absolutely. I mean, I've been in a number of businesses where people will say, "Oh, if we can just get the margins from 10% to 12% or 12, you know," and I'm like, "Well, that's that's really hard to do." Like, that's hard to do. But I remember when I took the role at

Pamper Chef, I had advised the business for about a year. So I had a pretty good sense of I think what needed to be done. Then I just needed to go do it. And I

thought it would take me a year or two um to go drive the change that was needed to get the business back on track. And it took almost three or four because everything took longer and was harder. You know, getting the right team, getting the right culture, investing in the right, you know,

systems in the business. We wanted to update the marketing and update the product. All of that took a fair amount of time. And I think that if my task was

product. All of that took a fair amount of time. And I think that if my task was to go sell that business in three or four years, I don't know if I would have done all the same things. I probably would have made some shorter term decisions that ultimately probably would have created less value in the business.

I think that's part of the reason that culture changes are so hard is that they're longer and harder than you expect. There's a timeline mismatch as well, too. Like CEO turnover, at least in the S&P 500, is as fast as it's ever

well, too. Like CEO turnover, at least in the S&P 500, is as fast as it's ever been, if not faster. And so you go in or think of a coach in a sports team, right? You go into a losing team, you're going to throw a lot of Hail Marys

right? You go into a losing team, you're going to throw a lot of Hail Marys because the expectation is just that, you know, I'm not going to be here for 10 years. I'll trade away that first round draft pick. I'll I'll do these

10 years. I'll trade away that first round draft pick. I'll I'll do these things that maybe would pay off in 3 to four years. Yeah. And I think that, you know, we all have incentives in life. And so recognizing what the incentives are often times show us what behaviors you will we'll have or what decisions we'll

make. And I think you mentioned culture. I think culture and people is the most

make. And I think you mentioned culture. I think culture and people is the most foundational and fundamental aspect of any business, any size. I think in mid-size companies in particular, it's incredibly valuable because um you have

often times more limited resources. Your team's smaller and so people are doing more in terms of their scope of responsibilities, their capabilities.

They oftentimes are very passionate and committed, but we don't always invest in that culture. And so, how do we continue? And I think the best

that culture. And so, how do we continue? And I think the best businesses figure that out. But I think as companies scale and you get bigger, there's more complexity in terms of the people side of things. So we always start with people, you know, do we have the right people in the right seats? Do

we have the right culture? Do we have the right engagement? Do we have the right talent development and talent management? Is we think about businesses? You can really enhance a business by focusing on the people and

businesses? You can really enhance a business by focusing on the people and the foundation. We focus there first. We focus on purpose second. What's the

the foundation. We focus there first. We focus on purpose second. What's the

purpose of the business? What's the difference we make in the world? Are we

aligned around that? What's the strategy to go execute that purpose and impact?

And then we think about performance third. And so then we say, okay, how do we actually achieve those goals? How do we drive alignment and accountability?

And how do we focus on purpose? I think if you start by focusing on performance, then I think you miss out on really these foundation settings which are so critical to get alignment and to drive ultimately the most value in businesses.

That's another thing that people just throw out casually. People are our most valuable asset. But it's so easy to say those words and so hard to live that

valuable asset. But it's so easy to say those words and so hard to live that because that means investing in your people. It means probably lowering your margins at certain points in time. It's taking a disciplined approach to how we think about people. So it's not just you know how do I reward people more or you

know how do we have more you know holiday parties or whatever it may. It's

actually taking a structured disciplined approach. We always say with our companies typically businesses have a structured view to thinking about strategy or KPIs or budgeting. They have a calendar. they have you know

discipline and a pro approach to that. We often say where's your people calendar? What is your same level of discipline approach you have on people

calendar? What is your same level of discipline approach you have on people because you should have the same and we put it in three buckets. You know how do we attract the right talent? So that's everything from you know hiring to

employer value proposition to what are the most critical roles to get the right people in. So on the attract bucket how do we develop talent? Are we thinking

people in. So on the attract bucket how do we develop talent? Are we thinking about where people are going in their careers? Are we helping them get there?

How are we thinking about that? And then engagement. Are we engaging our talent?

Are we thinking about the culture? Are we thinking about incentives? Are we

thinking about communication? And how are we doing that most effectively to support the the whole organization? The whole people framework is so significant in terms of what you can do in an organization, but it usually is an

afterthought. If you look at executive teams, usually in mid-size companies,

afterthought. If you look at executive teams, usually in mid-size companies, there may not even be an HR leader. if they are it's a more junior level generalist type person versus a true talent partner. And so that weight all

falls on usually the CEO to navigate it. But that's a lot when you're trying to navigate everything. And as you're scaling, it becomes more and more

navigate everything. And as you're scaling, it becomes more and more important because when you're small, everyone is close to the CEO. They see

it. They feel the culture. They see the work ethic and discipline. as you get bigger, you need to sort of step away and have more of a system and a structure that allows for that to continue because not everyone's going to be sitting, you know, shoulder-to-shoulder with the CEO. How do you evaluate talent?

Yeah. So, we do a few things within our businesses as we think about talent.

When we go into a new business, first of all, we really try to understand what are the mission critical roles in this business. We find most mid-size companies have between 15 and 30 roles that are the most critical roles to get

right. And these are the ones that are creating the most value. Each business,

right. And these are the ones that are creating the most value. Each business,

it may be slightly different. It may be sales in one business. It may be product development in another. It may be finance in another depending on what they're doing and how they approach. But do we really have clarity in what those are? Do we have the right capabilities? Sometimes you might have a mission

are? Do we have the right capabilities? Sometimes you might have a mission critical role that you don't have today that you need the capabilities. So my

example earlier of Pamper Chef like when I started a mission critical role for us was technology. we did not have those capabilities in terms of what we needed

was technology. we did not have those capabilities in terms of what we needed to go do and so we had to build it. But really assessing what are the mission critical roles that we have and then once we do that we assess okay who do we have in those roles today? Are they rock stars? Are there people who have you

know um a lot of opportunity in terms of their progression or are they people who are okay today but maybe aren't the right people longer term. So we try to really assess that in a disciplined way. I find the best way is you go in and

with someone and I can usually send I usually send like a list of questions that are um I usually have a few different frameworks but industry questions, company questions, department questions, you questions and I ask those

different questions and what I find is you can usually get someone's sort of assessment and understanding and their view of a world pretty effectively by just talking to them about what they're seeing. And then that helps us learn and

get better about the business as well. So that's you typically when we go into business and what we do once we're in a business then we really focus okay how do we develop our talent and so we're using different conversations and

different processes along the way to really make sure that we're aligned in doing that. For us it starts with do we goal set at the beginning of the year?

doing that. For us it starts with do we goal set at the beginning of the year?

Do we have clear KPIs? Because how do you assess people if you don't have clear KPIs? And so you have KPIs of what are we going to go achieve and then you

clear KPIs? And so you have KPIs of what are we going to go achieve and then you give people the flexibility to go achieve those. You don't tell them how to achieve them. You say okay you have the autonomy to go achieve these but you give them the skills. So we do problem solving training. We help support them

so that they're more equipped to actually go achieve those goals and you know they have visibility and then they have the alignment. We're all going in this direction. These are the most important KPIs. And then we incorporate

this direction. These are the most important KPIs. And then we incorporate conversations or feedback where we're actually giving real-time feedback on hey you did this really well. this is what we could do better. And then

through that, you're implementing a talent management process. And then

alongside of that, you're doing a leadership development process where you're identifying your leaders, you're helping them understand the vision, the expectations, the strategy. Ultimately, they're helping shape that strategy. So

it's a very sort of structured way of say how do we bring in people at the right stages at the right time to really help them enhance their own development, their own learning, their own contributions so that we can leverage their expertise and their their insights even more critically.

Are there tells in those interviews that you're doing with people that maybe they're not the right fit for where you're going or that this person isn't as good as you thought they were going in? I would say um the biggest tell I I

say is called handwaving where you're talking to someone about something, you ask a question and rather than answering the question, they sort of go all over.

They're sort of hand waving around or you start to drill in more and the handwaving begins where they can't really understand or explain it.

Typically, people who really know their craft and know their business and know the fundamentals can really explain why we do certain things, why we don't. They

may not have all the skills to go fix it, but they understand what the issues are and what the problems are. And then our goal is to help them understand, okay, this is how we can go address that or solve it. But that usually is you the biggest tell for me of um is can they get clear? Can they get crisp? Do they

really understand what's going on in their space? And it doesn't mean they need to understand everything in the business. You they need to understand the area that they're responsible for. I find oftentimes the best people just

have a natural interest, curiosity to solve the issues or they'll have views on things even outside of their area. You know, if one of the questions I'll often times ask is like, what are we not doing that we should be? And people

often times will say stuff in their area, but oftentimes they'll have stuff in other areas too that hey, I really thought if we, you know, could focus more on selling to our customers digitally that would allow us to transform the business and we're not doing that today. you things like that

help me sort of see do they have you just that innate engagement or excitement about the business and curiosity. I like that a lot. I think as you were saying that what came to mind for me was the ability to talk at different resolutions

from like the 1 in level to the 30,000 ft and then transcend the same problem.

For me and my role um it's understanding where are we in that conversation and who am I talking to? how do we get to that level and what's the right level?

And I find that people who are on the front line may not have the 30,000 view on where we're going in the business, but they're going to be really good at that 10-ft view and understanding the problem that they're trying to solve or the what's limiting them or holding them back. So really sort of figuring out

what's the right level to have that conversation. How do you go about finding companies?

You've acquired a few now. We find areas that we like. So we say if we want to go fishing, we want to find a pond with a lot of great fish. And so we want to understand what is an industry that we think has a strong mode or competitive advantage and we usually look at that by saying okay what are the

returns on capital in the space. So quantitatively can we see if there is a moat and then qualitatively can we understand the moat more effectively?

How wide is the moat? Uh is it getting wider or more narrow over time? Is it

durable? Like is it going to withstand the test of time? And so we're trying to sort of find those spaces. Once we find industries that we think are a fit there, we spend a fair amount of time reaching out to businesses, finding businesses, getting introduced to businesses. We have operating advisors

who help us understand as well. And then we really try to get smart and find how do we add value in these companies. And then another group of businesses we have are just people who come to us, people who hear about what we're doing, who are excited. And so they'll come to us and say, "Are you interested in my

excited. And so they'll come to us and say, "Are you interested in my business?" Um, which we appreciate. And we always have the same assessment of

business?" Um, which we appreciate. And we always have the same assessment of you know what's the mode of the business you know quantitatively qualitatively can we assess it and then how do we think about those areas and what we've

also done is we have built a community of 3,000 CEOs owners and founders that we bring together to provide content and resources and support and through that we learn about new businesses we learn new spaces which help us also be better

in terms of finding businesses that might be a fit for us. We only invest in one or two companies a year. We'll look at 500. So we're really selective at finding the highest quality businesses that have a long runway.

Is that the most important part of the process evaluating the moat?

We call the five M that we look at. First is moat. You know, what is the moat? What's the competitive advantage? Second is the market. You may have a

moat? What's the competitive advantage? Second is the market. You may have a moat, but is the market growing and do we think it's an attractive market? What

is the growth rate? What are the likely dynamics of that? Third, we look at management. Does it have a strong management team today? Or is it

management. Does it have a strong management team today? Or is it something where we think we can help build the management team if there's opportunities? Sometimes they'll be a great business. It's got three strong

opportunities? Sometimes they'll be a great business. It's got three strong leaders, but they need to build out a sales leader or a talent leader or finance leader. We can we help them do that? The fourth is what we call more

finance leader. We can we help them do that? The fourth is what we call more potential and there's some opportunity that's not being fully leveraged today that we think we can help them with. It might be expanding into new markets. It

might be a more structured approach to how they manage the business today.

There are a variety of different avenues in terms of more potential but absolutely a focus. And then for us the fifth is margin of safety. And what we mean by margin of safety is we don't want to have have to have everything go perfectly right in order for us to be successful. We want to have a little bit

of flex so that if there is something like COVID or a downturn or tariffs that we can navigate that well with the management team and we don't put undue pressure on the business to make shorter term decisions because of something

that's happening that may be outside of our control. What does moat mean?

For us moat is what we consider you a competitive advantage. And the simple example of like why a moat is it's a castle, right? Do you have a castle that is a strong business? And then the moat you want to have around is what defends

the castle and what is going to protect the castle. A wide moat is going to protect a castle more. A narrow moat is going to protect it less. A moat can be driven by different dynamics. It might be you have a brand and a channel that

in combination allow you to sort of keep customers out of your business. You

might have a competitive position that allows you to be the lowcost provider that then allows you to sort of attract customers and get route density in your market and then drive down prices further and costs further which then allow you to attract more customers and that will keep other people out of your

business. There's lots of different types of moes. There's network effect.

business. There's lots of different types of moes. There's network effect.

There's limited supplier power customer sort of concentration that can limit or expand your moat. But we're really focusing on how do we build a business that keeps competitors or new entrance out as effectively as possible. We find

that modes are changing every day and some businesses that used to have amazing modes like newspapers now have eroded quite considerably and there's other businesses where the modes are getting stronger. So trying to find

those businesses where we think we can expand the moat. Where do you think modes are getting stronger? It's hard, you know, in the moment to look and say this mood is

stronger? It's hard, you know, in the moment to look and say this mood is getting stronger because typically it's easier to look back over the course of 10 years. The mode has gotten better or gotten worse. I think AI is a good

10 years. The mode has gotten better or gotten worse. I think AI is a good example of that probably will erode a lot of modes in a lot of industries and businesses because it reduces the friction or the cost for a new entrant

to come in and you they can navigate the space more effectively. I do think there probably will be a subset of businesses where AI actually makes their moat stronger and because they already have some sort of structured system that is

allowing them to have a competitive advantage and so it might be you know maybe they've built out a salesforce with a technician base that is hard to replicate and for someone else to come into that and now AI allows them to quote more effectively or reduce their cost or improve their productivity so

that then their costs go down and if their costs go down then they can pass that on to the customer and sort of cycle that into keeping more customers more effectively. I think it probably is a little early in the context of AI to

more effectively. I think it probably is a little early in the context of AI to see, okay, who's going to be the biggest winner, who's going to be the biggest loser because it's a little bit more of a crapshoot at this stage. I'd say

I've been thinking about that a little bit recently. There's a lot of service businesses where AI could with somebody with a background with AI who has a reflexive AI mindset could come in and probably lower costs and create a

temporary advantage over the next I don't know 3 to 5 years but then you could use that to create this flywheel of pricing power with customers in the sense of giving better pricing so you're always booked but also in terms of oh we

can acquire businesses at the same multiple and get a way better return than other people.

Yeah. And I think probably the biggest question on my mind is, you know, how temporary is it and how quick is it? Will just it'll be a race to the bottom where now prices will just go down and then other entrance will come into the market and it'll the customers will capture the value versus the companies

or do you already have a moat or can you build a moat um in a in a time where it actually allows you to sustain it and then you ultimately get a stronger business and that's I think is interesting. We're spending some time thinking about that as well and especially in the service businesses and I think there are some that it's just

harder for new entrant to come in. If it's a regulated space where you have to get credentialed in and there's limited number of credentials that's harder for someone to come in. If it's you you have a huge salesforce or a service um force

that's going out and implementing and supporting your customers. That's harder

for someone else to come and replicate. Not impossible but harder. And so do you have that aspect of your mode already that you can reinforce and what does that look like? But I think that disruption is coming. You know, it's I think it's going to happen pretty widely in terms of different businesses and

industries. So if you have a great business today, are you thinking about

industries. So if you have a great business today, are you thinking about that and can you reinforce your mode and make it stronger? When it comes to quantitative assessment of these businesses, what are you looking at? Yeah, in essence, we're looking at like

a return on invested capital. Um and as we think about that is it going up is it going down is it staying the same do we think that that is reasonable for the space what we find is that's one part of it like you need to understand the

quantitative and typically if you have a moat you can see it you can see it in your returns uh in the business on what you're doing and you know your return on capital but beyond the quantitative is then the qualitative you is like can you

define it can you explain why do you understand that that I think becomes more important because if you looked at the newspapers I would say once the remote started to erode quantitatively it still looked good for quite a period

of time even though qualitatively it was starting to erode at that stage the financials lagged and then it caught up but I think that's typically what we're trying to do is look at both the quantitative and the qualitative side and when it comes to return on invested capital what is that for us it's really looking at you know

what's the earnings in the business and then what's the capital required in the business to report those earnings. And so you can do the calculation and get a ratio. We typically say like an okay business is maybe 20% return on capital.

ratio. We typically say like an okay business is maybe 20% return on capital.

A great business is probably looking at 50% plus in terms of return on capital.

And when you say earnings like there's a lot of uh ways that people are defining that now between EBITD, IBIDA uh operating earning like what is earnings?

We usually look at EBIT or you know earnings before interest and taxes. Our

view on sort of evidas there are some industries where it makes sense but in most industries depreciation amortization is real and so if you focus on that I think you sometimes um give yourself false confidence in terms of

what the business really looks like and what it really generates because in essence you're trying to get a proxy for cash cash flow and cash generation. So

when we look at it, we'll look usually look at EBIT as sort of an earnings approach and then we'll um focus in terms of what's the capital in the business. But earnings we usually define as EBIT. In some cases we'll look at EBI

business. But earnings we usually define as EBIT. In some cases we'll look at EBI but we try to be pretty selective of how we do that in the industries where depreciation amortization are real. And how are you defining capital? Is that just equity?

In capital we're looking at a few different things. What's the capital actually required in the business? So what you're putting into it, you your PP&E, if you need like lots of AR to support your business, really trying to

fundamentally understand what capital is required uh to support this business, what inventory is required to support the business. Uh, every business is a little bit different, but there might be a business where the earnings look really great, but then they have a huge inventory on their balance sheet to

support that that level of uh, earnings. And then that business is probably a little less like a less good business because you have to have this, you know, inventory to support it. And that sometimes may be you have a lot of locations, so you need to have

facilities with all the inventory. It may be your customers require you to have a lot of inventory to support the business. There's a lot of different dynamics that um you play into that, but we're really trying to understand what

capital is required to support the level of earnings that you have in this business. Your best businesses usually don't require a lot of capital. There

business. Your best businesses usually don't require a lot of capital. There

are caveats to that too. I mean, you you can get a higher return on capital, but also potentially someone can enter the business more quickly if you don't have capital in the business. If you have capital in your business, that's usually harder for someone to enter, but you can get other types of modes or impacts. Um,

and I think you're seeing a shift in this. If you look at the tech businesses, historically, there wasn't a lot of capital required. Google or

others, they had network effect and these other dynamics that drove the moat. And so, you didn't have capital. Now with AI, that's shifting quite

moat. And so, you didn't have capital. Now with AI, that's shifting quite considerably. Um, but also that probably makes it harder for someone else to come

considerably. Um, but also that probably makes it harder for someone else to come into the business as well. And when you look at market, what makes an attractive market?

So, when we look at market, you we're looking for a few things. One is what's it growing? What's the growth rate in it? Is it growing at GDP? Is it growing

it growing? What's the growth rate in it? Is it growing at GDP? Is it growing above GDP? Do we think that that's sustaining? You know, there might be a

above GDP? Do we think that that's sustaining? You know, there might be a situation where the business is growing very the industry or the market's growing very fast right now, but you're it's going to decline over the next 5 years or no, we think it's going to continue to grow at 20% plus a year for

10 plus years. So, trying to understand what the growth rate is. How's it relate to GDP? Second, we're trying to understand what are the dynamics of the

to GDP? Second, we're trying to understand what are the dynamics of the market. Um, is it a situation where there's a lot of fragmented players? Is

market. Um, is it a situation where there's a lot of fragmented players? Is

there, you know, a couple behemoths? um is it one where um there's opportunity for consolidation or not? We're trying to just understand what the dynamics are and sort of how it works. Are the other players in the market rational if it's

you know more concentrated? Um what are how do we think about the path forward and what that might look like and where do we think we would play in that market and what do we think the path forward would be. Um but we're first starting with sort of growth rate and dynamics. We've already talked a little bit about

management and I I think most of our listeners will understand a little bit of margins of safety enough for the conversation. Anyway, what did you mean by more potential? Is that like a lottery ticket? No, it's less of a lottery ticket, but really like where's the opportunity to sort of grow this business and what does

it look like? So, for example, we partnered with a company Marine Concepts sells boat covers. Now, when we partnered with the company, it was started by drumman Randy Kent based out of Lake of the Ozarks. He had a facility and a market in Lake of the Ozarks. He had great market share there, great NPS.

The product was incredibly um you know strong. He had moved a little bit and sold some in Florida, but really he hadn't expanded beyond that. So the more potential there was can we take this company that has a great product, has a great reputation, great NPS, great margins and expand it. And in this case

we wanted to build out a dealer network. So can we expand that through a dealer network and growth? So that was the more potential in that business was how do we expand it and doing something that they're not doing today versus a business where you may come in and it's already at full potential right the

business is operating super well not as many growth drivers or growth opportunities left where what are you going to go do like it's growing at GDP probably like it's going to be hard to really go accelerate growth in coke whereas for us u playing in the mid-size market there's a lot more opportunity or

JM test that was a 40-year-old business that we partnered with family business started ed by the Morrison family grew 20% a year over the last 20 years in sort of tent branches and regions today but an opportunity to move in

geographically into new regions increase penetration in our existing markets and then three look at potential acquisitions for other family businesses that want a long-term partner and so for us that was the more potential in that business so each business is a bit different but really understanding

what's not being sort of fully optimized today we always start with sort of our purpose which is helping organizations and people reach their full potential.

And so as we think about a new partnership, how do we think about what that full potential may be? And then what's what's the opportunity for us to help get help them get there? And do we bring some sort of skill set, experience, perspective that can help accelerate that? And when you look at sort of the

potential, does that factor into the margin of safety or no, that's like in addition to we're going to have a margin of safety anyway. This is more like an added layer to that. I think if we think of this as like a growth potential, but

it may contribute to margins of safety. If we said, you know, if this business will work at this valuation, even if we don't do anything and then we're able to go drive this growth, then that gives us more comfort and the margin of safety

and where where we are. But um they can be interconnected, but it's not necessarily have to be.

And so what happens? What's the playbook post close? So you you've found a company, you love the management team, you love the people, it's in a great market, you think there's potential for more. Day one, now what?

Actually, before even day one, like when we close, during the process where we're getting to know each other, we're doing diligence, we're sort of spending time with them, really understanding um what are their views on the industry, what are their views on the business, what does management think the biggest

opportunities are. We're oftentimes doing interviews. So our Camber business

opportunities are. We're oftentimes doing interviews. So our Camber business system team will spend time meeting with 70 75 people in the business and understanding where they think the opportunities are as well. So we're

doing that during that sort of um diligence process going up to the close.

Once we close um with a business, we're really trying to understand where are they on their own journey. And so we have a diagnostic to assess on all these frameworks, people you attracting talent, developing talent, engaging talent strategy KPIs budgets what's their self diagnostic on their sort of

sophistication in these areas. And so they'll do that and then we'll do that and then we'll come in and say, okay, given this, what what do we want to go build together? What does it look like? There's a few sort of critical

build together? What does it look like? There's a few sort of critical components of the initial partnership that we do. Usually it's a part of a strategic planning process. Um our KBS team will come in and work with the management team to sort of really think about what's the future direction of the

business and what are the opportunities, what are we doing well today, where are there opportunities we're not, you know, doing as well today, where can we sort of grow, where are the challenges facing the business. So having those types of conversations and that really is a collaborative, you know, hands-on

experience that we're partnering with them to assess. As we're doing that, we're simultaneously saying, okay, do we have the right capabilities? Do we have the right roles? Do we have the right people to help support that growth? If

we say, you know, we want to go expand into new markets, you know, do we have that capability? Do we, if we want to go do acquisitions, do we have that

that capability? Do we, if we want to go do acquisitions, do we have that capability? If not, how do we build that capability or add that talent internally

capability? If not, how do we build that capability or add that talent internally that allows us to have that sort of flexibility? And then we're really building a road map out for the first 12 to 18 months of, okay, what are we going to go do together and what does that look like? We uh say from our

perspective, you know, I've been CEO, my partner's been CFO. We don't want to be the CEO and CFO. Again, we're not trying to do your job. We're trying to be the resource that we wanted. And so, we're being helpful on the biggest strategic decisions you're making in a business and really partnering with them and then

giving them feedback and help along the way in those critical areas. Talk to me a little bit more about that in in the sense of you're the majority owner now and you have a CEO founder uh who's run the company successfully and you're not

telling them what to do but you're nudging like how does that work?

Yeah. I think of it as like co-creation. So they have a view. They're going to be smarter about the industry than we we ever will. They'll have the depth of knowledge, experience, what's worked, what hasn't worked. What we'll bring is outside perspective and a lot of questions. And so we'll say, "Have you

thought about this or what about that?" Or, "Hey, there's an industry that's like this that you we've seen that 10 years ago this happened and it looks like it might be similar. What might be similar or different?" So, we're trying to do that together in partnership with them so that we can co-create and get to

a shared vision of the world and what we want to go build and what that looks like. And so, in essence, we think of it as like we're their strategic partner in

like. And so, in essence, we think of it as like we're their strategic partner in assessing that. And then once we've assessed that, we sort of come in and

assessing that. And then once we've assessed that, we sort of come in and help them with sort of the skills and frameworks to go do it. So for example, we have someone on our team who really specializes in sort of KPIs and the budgeting process. So he's going to help them implement a KPI process if they

budgeting process. So he's going to help them implement a KPI process if they don't have one already to say, okay, how do you build KPIs? What do good KPIs look like? What are the important drivers in this business? What are the

look like? What are the important drivers in this business? What are the right benchmarks? You know, how aggressive do you want to be or not? And

right benchmarks? You know, how aggressive do you want to be or not? And

sort of helping them think through that. on the budgeting or we sort of think of it as resource allocation side. Do we have the right resources to sort of fund our future growth and what we want to go do? Um how do we become more efficient in in some areas so that we can go invest in other areas? So we're helping

do that or we have someone on our people team who's going in on the people side and saying okay we understand that uh we need to go drive this growth in the business. We want to drive this growth. Okay, what are the mission critical

business. We want to drive this growth. Okay, what are the mission critical roles that we have today? Do we have the right skills in those roles and the right people in those roles? If not, what changes might we need to make? And

then, oh wow, we're going to really need to engage our middle level management if we're going to go grow and expand. Do we have the right, you know, development for them? Okay, we need to be implementing quarterly director days

for them? Okay, we need to be implementing quarterly director days with that group so that we can help them become, you know, better leaders so that they can help us at this new stage of growth. or you know perhaps we haven't done a lot on the engagement or communication side and we need to

implement quarterly town halls where we're helping the company understand the vision and the strategy and direction so that we can help accelerate growth so that everyone feels they understand the vision they're bought into what we're trying to go do and they want to sort of help us at that next phase

and when you say KBS you mean the Kendrick business system correct and these are all the components of it that we're talking about now why come up with a repeatable system and is it similar to the Danaher one or different

maybe give me a little bit of compare and contrast I was CEO I wanted to go out and learn from others and what I found was some of the best companies out there have a scalable repeatable business system Danaher Marman Toyota it is an

integrated way of how they manage the business so that it's not peacemeal but really it's a holistic approach where the components of the approach reinforce each other and if you do one in isolation you get less value than if you

do them together and they're complimentary in nature. And so you could have a strategy process, but if you don't have the right people and the right skills, you're going to be less effective at implementing that strategic process. If you have amazing people and a great culture and great environment,

process. If you have amazing people and a great culture and great environment, but you don't have KPIs and alignment, you're not going to be able to achieve as much with those people. So by adding these different components and focusing

on what matters most in a business, you create more value overall. And I think you there's amazing examples Dan or her being one of that's created tremendous of value by having a structured systemized way of managing a business.

And what we found is that most midsize companies they're struggling with the same things. How do I get the right people in the right seats? How do I

same things. How do I get the right people in the right seats? How do I build the right culture and right engagement? How do I get the right strategy without you, you know, paying Mckenzie or Bane to help me? How do I go and execute that strategy and drive accountability and action into the

businesses? And so what we're trying to do is saying rather than you have to go

businesses? And so what we're trying to do is saying rather than you have to go figure that out, we've done the work to say, hey, here are the structured ways to go do it and this is the sequencing that works for where you are in your business that we can help you with. And so that very much has been our approach

to how we think about it um with our business system. And what we did is we went and learned from some of those best out there from Danahur, from Marman, from um Constellation and others and sort of took parts of each that we liked

where we thought that they were the most successful and sort of took those and distilled them into our own business system. Ours probably has more of a focus on people um and culture than others do, but I think that's a function of where the world is today and compared to 20 or 30 years ago where a lot of

those um business systems were started and but has similar approaches in terms of continuous improvement or strategic planning or KPIs that many business systems have and we feel like you know we're standing on the shoulders of those giants who've done a great job of building them and we can enhance them

and tailor them for sort of our types of businesses. Why do you think more people don't copy the Danaher business system? I mean, a great recent example of that is Larry Culp using it to turn around GE. Yeah. Uh it's a proven system. It's

successful. It probably takes a couple years to implement, I would imagine, throughout the organization, but it works. So, I think more people don't do it because it's really, really hard. It requires extensive discipline and

structure and focus and adherence to the system for it to work. You can't just do a piece of it or one part or for six months and you actually have to have it become part of the DNA and the culture of the business. So I think in longer

term like holds people don't do it because it's a discipline. I think in shorter term holds if you are you know private equity you don't have the time period to get the benefits of doing it and so why would you spend two years going and implementing something that you're not going to probably reap the

full benefit of in year three or year four when you need to exit the business.

And so for us having a longerterm horizon, we can invest in that and we see the value of it. Um, and we have the team to help support the discipline and the adherence to it. I also think a lot of investors haven't actually been

operators. And so it's really hard to go into a business and say this is what you

operators. And so it's really hard to go into a business and say this is what you should go do to operate a business if you've never actually operated a business. And so you're you probably don't have the same insights or the

business. And so you're you probably don't have the same insights or the value of that or understand the value of it. And you might have an operating team who's you know doing it for you but you know usually a lot of firms the operating team sort of secondass citizens where they're not at the same

seat of the table as the investing organization. So you started KBS in 2020. Mhm.

What's changed over the 5 years? What have you learned from implementing this over the last half decade? Yeah. So um we we actually started it when we were at Camp Chef, right?

without ever the fun foundational pieces where we were learning and trying things and then we formally sort of codified it when we started camber in 2020. It has

changed a lot and it gets better every year and every season in every business we work in and we think of it as this it's living and breathing. It's not a stagnant system you go and implement and then you forget about it. It really is focused on continuous improvement and each company we engage with helps us get

better at it. But the mistakes um that we learned from started very early on.

So when we were at Pampered Chef, we first rolled out KPIs. Um we rolled out KPIs to the entire organization and we said, "Okay, great. We're going to do KPIs. We're going to roll it out you 500 employees. We'll roll it out to

KPIs. We're going to roll it out you 500 employees. We'll roll it out to everybody." And that was a huge mistake. You we just it was too fast and the

everybody." And that was a huge mistake. You we just it was too fast and the organization wasn't ready. Um they you we should have started and sequenced it and started just with the executive team in year one. Once you have the executive team understanding, aligned, working towards it, then you go to the next

level and then ultimately you go to the next level. We thought we could move faster and just roll it out because it was a small business. You know, related to that, when we rolled out our KPIs, we're like, "Okay, great. You have KPIs, go figure them out." And what we fig we thought was like employees will figure

out how to go do it. Well, it turns out you have to help people and you have to understand problem solving and help them understand how do I go solve a KPI. Just

because you give me a KPI doesn't mean I actually understand how do I go drive it. It doesn't mean I'm not capable or I can't figure it out, but it's going to

it. It doesn't mean I'm not capable or I can't figure it out, but it's going to be much more effective if I give you problems solving training to help you have some case studies and examples of what this looks like in action. On the

people's side, when we first started, we rolled out 360°ree feedback in year one.

And what we found with 360°ree feedback where people get feedback from not just their manager, but peers as well as direct reports, is if you're in an organization where you don't have trust or psychological safety, it doesn't work. um you know the feedback isn't very good. It's shallow. People are

work. um you know the feedback isn't very good. It's shallow. People are

defensive. People attack like it's not productive or constructive feedback.

So in doing that what we realized was okay organizations aren't ready for this in terms of people in year one. We need to build up to it. We need to build communication and engagement in the organization and transparency. We need

to show them that we're going to you know do this first. We need to explain why we're doing development. It's not to you exit people. s to help them in terms of their career progression. And so by learning those things along the way, we

get better at what we're doing. In the recent years, we've realized just more simple, like clearer, less um as concise as possible. Dawson Shamblin, who leads

our KBS team, is terrific at this. He's just a natural learner and working on improving the system. And after each partnership, we reflect and say, "Okay, what went well? What could have gone better? what do we think needs to shift

and alter? And it's also great. We'll go into businesses and we learn of what

and alter? And it's also great. We'll go into businesses and we learn of what they're doing really well and like, oh wow, they actually do that better than us. Okay, can we tweak this or you can we utilize them? And we see it in our

us. Okay, can we tweak this or you can we utilize them? And we see it in our community, too. The group of 3,000 owners, CEOs, we learn from them of how

community, too. The group of 3,000 owners, CEOs, we learn from them of how they're navigating these types of topics and that helps us get better. Uh, as well, I love the idea of the the community. There's, you know, I think you had

mentioned there's sort of like accelerators for startup companies, but there's no real accelerators or network for midsize businesses.

Yeah. My view is that mid-size companies are in this middle um sort of gap area.

On the smaller side, their startups have accelerators, they have different programs. Bigger companies have more resources. They can bring in a consulting firm or someone to help them or pay for a resource on a specific topic. If you're in the middle, you're constrained by resources typically, both

topic. If you're in the middle, you're constrained by resources typically, both time, people, and dollars. And so, but you have many of the same challenges to figure out and to navigate. And so, we built the camera community for what we

wanted, which was resources and people to learn from that have done this and have made mistakes and learned and gotten better. And by bringing those people together, we're sharing our own resources and content and perspective

and experience, but also other people in the community are sharing theirs as well. And so that sort of shared ecosystem of learning, improving,

well. And so that sort of shared ecosystem of learning, improving, getting better um has made, you know, everyone in the community participates better in their businesses, but also um helps us as well. And then how do you think about debt

when you take over a company? Yeah, so we're pretty conservative. Um

so back to that margin of safety. We believe if everything has to go well and to be you know to be successful in the business that makes us nervous and leverage is one of those things that you the more leverage you put on the business the more everything has to go well for that to to be able to service

that. So maybe a traditional private equity might put four to six times the

that. So maybe a traditional private equity might put four to six times the leverage on a business. We'll probably do two or three times. We might also use a term of like a seller note where the seller is helping finance um that which is a little bit more friendly than bank debt or some other debt option. And so

we're in general a little bit more conservative. Our view is that leverage amplifies returns on the upside but also on the downside. And so we want to have a bit more margin of safety. We don't want to put the company at risk. We

don't want to push ourselves to make short-term decisions because of a structural decision that maybe juiced returns a little bit but isn't actually what we think is best for the business. I have a hunch, maybe correct me if I'm wrong, but when you're buying these businesses, they don't have a lot of debt on them.

No, typically not. Most entrepreneurs we meet at some point had some moment in their business where it was a bet the business type situation and oftent times that might have been leverage or something else where they almost lost

the whole business. And when you have those situations you've gone through, typically as an entrepreneur, you're like, I don't ever want to be there again. So, I'm not going to ever put myself at risk. And so oftentimes I

again. So, I'm not going to ever put myself at risk. And so oftentimes I think some mid-size companies are actually you know you almost debt too debt adverse where you know they won't even have you know mortgage on a property or you know use financing on um an area where it might actually be

prudent. Um and they be more inclined to take equity or more expensive capital or

prudent. Um and they be more inclined to take equity or more expensive capital or not use you the capital options they have because they're so afraid of something bad happening. And it typically is stemming from something bad happened at some stage and they almost lost their business and they don't want

to be ever close to that again which we can respect and we understand you know if you have a great business you don't want to put yourself in a situation where your business is at risk because of a capital financing decision.

You guys have embraced AI internally at Campre. How are you using it?

Yeah so we think of AI in three different ways. one is at Campbreak. How

do we become use it um and ultimately become smarter, more efficient, more productive in our own processes and how we operate? And so that's everything from you we use it for better note-taking um research on businesses um

moving faster as we sort of deep dive in a space and getting smarter um as we think about uh the businesses more holistically we definitely are using it.

The second way we're thinking about it is what are the industries and businesses where AI will affect the industry and potentially strengthen the moat as we sort of talked about a bit earlier and um are there spaces that we

think are attractive. looking in sort of what we call sort of AI enabled services businesses where we think it can strengthen the mode of the business that we're still earlier stages on because I think there's a lot of uncertainty of what it happens in different businesses but we're spending time thinking about

that and then the third is in our companies and in our companies there's two I think main ways we think it can be helpful one is just structured way to help our businesses think about the key management aspects where they can be

more effective So an example would be hiring. We have a hiring process. We

have a structured um you know you do a scorecard and you do this in terms of sourcing and then you do this in terms of selection and an interview process.

And if you do this you know it will improve your odds of success. But it's

very hard to be disciplined to it because it takes time and it takes you requiring u to step back and think about it. You need to build a case study. You

need to do all of these things. And so, can we build a hiring tool that takes away some of the work required that allows you to still adhere to the process with discipline, but not all the time to build the process? So, can we

build a scorecard for a role more effectively? Can we pull from other similar type roles and pre-populate it and make you a little bit more efficient as a hiring manager? So, we're spending time on AI on topics like that that will affect every business. And then we're spending time on, you know, can we think

about our productive like workflows in our business and how do we be more effective? I think people are starting with like the simple stuff like how do I

effective? I think people are starting with like the simple stuff like how do I become more efficient or can I think about my call center but we're thinking probably more on the revenue generating side. Uh can we quote you can right now we have a business that takes 48 hours to quote can we get that down to 48

minutes um but without sacrificing quality u by utilizing AI more effectively. Um are there other workflows like that on sort of the sales or marketing or um productivity side

where we can significantly improve um how we are engaging with customers or making decisions or speeding up things that will then allow us to attract more customers or service our customers better. And so that's the third aspect that we're working on

when it comes to hiring. Like what does that process look like? like what does that nitty-gritty look like in the details? You've u you guys have recently hired a new CEO for one of the companies you had. What is that process like?

Yeah, so um we very much describe the WHO process. So by GHS smart um there's a book called who it is, I think single-handedly the best simple book on hiring. And if you read that book, almost everyone will become a better

hiring. And if you read that book, almost everyone will become a better hiring manager. And there's a few components to it and we've augmented and

hiring manager. And there's a few components to it and we've augmented and added our own. But the first is building a really in-depth scorecard for the role. Most people completely skip this process. They just jump to I'm going to

role. Most people completely skip this process. They just jump to I'm going to write a JD. I'm going to post the role. I'm going to start interviewing and then I'll sort of figure it out. And people usually do that because you're in pain.

You're trying to fill a role and you you don't have someone in the role or um you don't have the right person and so you just want to get going. And we always say by doing that you may save your time today but you're going to lose time down the road because you're not aligned with your counterparts on it. you don't

market to the right people, you don't interview the right candidates or you know you hire the wrong person and then you've got to exit that person and you lose lots of time and money in doing that. So how do you actually start up front and get aligned and get clarity on what you need in the role? And so a good

scorecard in my our mind has three sort of critical components. The first is what's the mission of the role? And so really clearly what are you going to go drive in this role and how do you make it like specific? You want it time

bound. you want is as like um as measurable as possible. So if you're

bound. you want is as like um as measurable as possible. So if you're hiring a VP of sales, you might say, "We want to double revenue over three years

by improving um our industrial account management and adding large industrial contracts and we want to build a team of, you know, farmers or we want to build a team of hunters, whatever it may be. And by doing that, what do you want

to achieve? What's the time you want to achieve it?" and some level of the how.

to achieve? What's the time you want to achieve it?" and some level of the how.

And the how is important because sales leaders are very different. Like if

you're going to sell through Amazon, you probably need a different sales leader than if you're going to sell direct or if you're going to sell through large customers. And so can you are you clearly articulating what you need? So

customers. And so can you are you clearly articulating what you need? So

that mission is important. The second is the outcomes. So three to five really clear outcomes of what you're going to go drive. So that might be growth within revenue, but it also might be we need to grow margin or we need to, you know, improve from four national accounts to 10. whatever the outcomes are that you

need for that role as clear and crisp as possible. And then the third are competencies and what are the competencies needed for this role and we think of competencies on two levels. One is functional. So there's some roles where you you need a certain type of competency. So you might need analytical

or you might need relationship based whatever it is for that role. And then

there's company to big cultural competencies. We need everyone to be humble or open to feedback or aggressive whatever it is for your business. And so

the scorecard is putting those things together. The hiring manager puts those together and then shares that with their counterparts and so other stakeholders and then you beat it up. And what you'll find is people will say, "Whoa, you think we need to grow through national accounts? I think we should be going to

mom and pops." And that conversation is had early in the process where you can get alignment, have disagreement, but then move forward on what you want to go do. Once you have that scorecard, then you, the hiring manager or the recruiter

do. Once you have that scorecard, then you, the hiring manager or the recruiter or the search firm know like, okay, this is what the person needs to go do. I can

find people who can go do this. I can build a JD that's going to market to people who want to go do this and I can more clearly articulate it. And then

that scorecard then flows through the interview process. So now I have know how to interview. So that's the first component is the scorecard. The second

component is the sourcing. And so most sourcing in most companies is very reactive. you know, I I post the job and people apply. And my view is like

reactive. you know, I I post the job and people apply. And my view is like oftentimes the people applying aren't always the people you want, right?

They're the people usually who don't have a job or unsatisfied in their job.

Oftentimes your best performers are happy in their job and they're doing really well. And so you need to go find those people. And so having the hiring

really well. And so you need to go find those people. And so having the hiring manager or the recruiter reaching out and taking ownership of that to actually find the people that you want to have and not just waiting for people to come

to you. So really diving into more specifics of how do you go source? And

to you. So really diving into more specifics of how do you go source? And

then the third is around selection and how do you improve your selection process and this is what most people think about when they think about hiring is the selection part. Our selection has a few different sort of components to it. So the first is actually like the hiring manager we do a screening with

it. So the first is actually like the hiring manager we do a screening with the recruiter but then the hiring manager going deep on different areas that we think are important in the role from the scorecard. So the outcomes um the competencies in that first interview and then actually having an interview

panel that have different people interviewing different areas. So what we find most interviews start with like tell me a little bit about yourself and you know tell me about your background and then 20 minutes later then you've had that same conversation or that candidate's had that same conversation

with three or four different people versus saying you know your job is to interview on uh outcomes and all you're going to focus on are these outcomes.

Your job is to focus on functional competencies. All you're going to focus on is are they analytical if that's what you're looking for, right? Relationship

based. And then the um one person focusing on cultural. I'm like in your interview comes in, you're not worried about what their past role is or how competent they are in terms of the outcomes. You're worried about their culture. And so having the interview set up from that and then we augment those

culture. And so having the interview set up from that and then we augment those interviews with a behavioral assessment. So we usually do behavioral and cognitive which we think helps us better understand some of the cultural and

aptitude aspects. We usually do a case study, which is a deep dive on real

aptitude aspects. We usually do a case study, which is a deep dive on real topics that we're facing. And then we usually do a top grading interview, which is a in-depth, usually 90 minute to three-hour interview where we're going through every past role that they've done, what were the outcomes or

the scope of responsibility, how did they perform, what would their manager say about them, those types of conversations. So, it's a pretty in-depth process been followed based on sort of who, but it significantly

improves your outcome of success. One of the businesses you're not interested in acquiring is insurance. I'd love to hear more about that. Yeah, I think there's a lot of industries we don't invest in. Healthcare financials insurance real

estate. Typically, we want to focus on what's our circle of competence. Where

estate. Typically, we want to focus on what's our circle of competence. Where

do we think we have you value and expertise that's going to enhance what we're doing? So, we focus on services, industrials, consumer, um, both by our

we're doing? So, we focus on services, industrials, consumer, um, both by our background, but also where we think there's attractive opportunities.

insurance is a you can be a really good business, but a lot of capital has come into it in the last 15 years. And so it probably is a more competitive business.

Um there's more risk in it than there has been. And there probably will be times where it's a really good business, but there'll be times where there's more capital, so the pricing gets less disciplined and then it ends up being less attractive of a business. There are other dynamics that are attractive, like

if we ever found, you know, the perfect insurance business. It's not saying we wouldn't do it. Um but it's probably not a focus for us for those dynamics and the fact that where we are playing there's a lot of opportunity and so there's just more there than we see sort of possible in insurance or some of

these other sectors and some of them are just more complex. The risks are higher.

If you mispric insurance you don't understand your costs for a long time but it can you know be very very difficult to an organization and you can erode you know all your profits if you mispric. You've been on a lot of boards so you've

been on the Dairy Queen board. John Mansville Craft Heinds. I would love to hear about what you've learned from those experiences and then how you took that and you're applying that now at Camp Brick. Yeah. So, I'd say you each board I've

been on I've learned different things um both in terms of what to do sometimes what not to do and some of them have been unique where you know it was the CEO reporting to me directly and not a formal board and other times a more

formal public board or private board. And what I find is for the most part most boards don't add a lot of value to the businesses and I think they oftentimes go too deep on areas that are less critical and not enough time on the

areas that are most critical that they can provide the most value. So within

each business really understanding what are the you know three to five big levers that are going to shift and create the most value in this business and how do you spend your time talking about those levers versus all the

smaller things that might be urgent. They might be happening. They may be important, but they're not going to fundamentally change the direction of the business. And so, I think the best boards figure out what those are, focus

the business. And so, I think the best boards figure out what those are, focus on them, and drive conversation around them, and then provide insights or value to the management team. I think most management teams would come out of most

board meetings and say, "That wasn't a good use of my time because I was just updating and telling them what I did, you know, for the last quarter or whatever it may be versus more forward thinking. This is what I'm struggling with." And most boards don't have the context in the business enough to be

with." And most boards don't have the context in the business enough to be able to add value. So how do you make sure the board is knowledgeable enough about the business and can also ask the right questions even if they're not going to be as deep as the CEO or the management team. And I think it's a fine

line of you know getting that right balance. But those are some of the things that I've learned as I've thought about different boards and how we think about our boards.

And do you think the role of the board is different in public companies versus private companies?

Yes and no. I mean absolutely like there's a public dynamic where you have a fiduciary responsibility. There's a enhanced governance um and some other dynamics that are important and you know regulated in terms of where you need to spend your time. I think there's some that's less valuable earnings and

quarterly reports. I think that's probably less valuable to value creation

quarterly reports. I think that's probably less valuable to value creation in the business. I think on the private side people set up their boards in different ways. Sometimes it's set up more as governance and oversight and shareholder

different ways. Sometimes it's set up more as governance and oversight and shareholder um you management. Other times it's set up more as advisory or insights and I think different private boards do it differently. I think our view is that um

you probably you want somewhere in the middle where you're having some governance but at Camber we provide most of that but really it's the valuable insights perspective relationships introductions that are going to create the most value that we want our boards focused on. Is there a moment without

naming the company where you were in a board meeting and you were just taken back by what was happening or like in a bad way? Yeah. Yeah. I mean many of them uh and some of them good boards but I remember there was a a board meeting we were in and we

were like assessing the packaging of the products and you in detail which I think that's very important. The packaging of a product is very important. I don't

know if the board is the best people to be assessing and commenting on the packaging of business. Like I think that's what the the the management team and the marketer should be doing and I think those are you conversations you

have to be like thoughtful about or you know you're on in a slide deck and it's slide 112 and you know you're being read the slides and like really like this is how we're going to use this time like I don't think any slide deck should be 112

for a board. I mean, usually there's 20 slides maybe that get to the heart of the most important topics you're facing at a time. And then most of the time should be discussion and not presentation. It's not a dog and pony show, but I think it's set up typically for the management team to come up and

say all the things that we've done and how smart we are and how talented we are and how you should be applauding us and the board, you know, is doing that on the other side versus is that going to create the most value versus, hey, these are the three biggest issues we're facing right now. this is what we're

struggling with. This is what we need your help with and this is what we want

struggling with. This is what we need your help with and this is what we want your perspective and insights on. Now, that's a completely different dynamic.

You need to have psychological safety. You need to have trust. You need the management team to be open to receive the feedback. You need to have board members who are capable of providing valuable feedback. You need all of those dynamics to to come together. You mentioned Katherine Graham and her

biography earlier. I want to circle back to this because it just brought back a

biography earlier. I want to circle back to this because it just brought back a little bit of a memory. uh and it involves Buffett. But it was interesting, she had mentioned something, if I can get this right, where he had brought all these annual reports to her and he was teaching her sort of like the financial aspect of

running the Washington Post. And one of the things he mentioned that stood out to me was he was just showing her a balance sheet over five or 10 year period of time. What can you learn from a balance sheet, just a pure balance

sheet over that period of time? What insights do you get? I mean, you can see a lot in a balance sheet. You can see how much inventory do you have. You can see what capital is

sheet. You can see how much inventory do you have. You can see what capital is required. You can see are your accounts receivables like are they going up? Are

required. You can see are your accounts receivables like are they going up? Are

they going down? Like there's a lot of insights that you can see from all three financial statements. And then if you if you start to understand the business

financial statements. And then if you if you start to understand the business drivers of the business, you can understand this as well. And I think what you typically you'll see is that most leaders don't always I think we

assume they understand all of that in a business. And I think some do and understand it fundamentally really well. Some understand it, you know, tactically well. Sometimes people understand it in their like in practice but not

well. Sometimes people understand it in their like in practice but not necessarily the theoretical like how it actually works. And you when I think it's really valuable though for your leaders and not to assume your leaders

understand all of that because some people are more financially literate or financially like have more financial acumen than others. And it doesn't mean they can't learn it but if you equip them with those skills they're going to be better. If you think about a CEO for example oftentimes CEOs are great

be better. If you think about a CEO for example oftentimes CEOs are great operators. They usually have come from sales or marketing or operations. They

operators. They usually have come from sales or marketing or operations. They

seldom come from finance and it's not usually the the career career trajectory. And so, have they actually learned those aspects? And where along

trajectory. And so, have they actually learned those aspects? And where along the way did they learn them? And do they understand? And oftentimes in a business, you're making really important operational decisions, but you're also

making really important capital allocation decisions. And you can really uh ruin a good business with poor capital allocation decisions. And we

think of big ones, acquisitions being the biggest, where we destroy value often by acquiring a business that isn't a very good business or paying their own valuation for it. But there's capital allocation decisions every day in a business. You know, should we invest in this factory? Should we open this

business. You know, should we invest in this factory? Should we open this distribution center? Should we move into this new market? Um, we think of hiring

distribution center? Should we move into this new market? Um, we think of hiring with the same level of complexity. like you know it's not a capex decision but if you thought of it as a capex decision if you're going to hire someone for

hundred grand right a year and you think the you discount the value of that you know it's a million dollar investment that you're making in that person if you're you can fire them but you probably won't they'll stay at the

organization so do you have that same level of discipline and rigor in your decision- making on all those types of topics and CEOs who are more equipped at like fundament

understanding capital allocation usually can make better decisions in their businesses. Now, a lot of entrepreneurs, they do that instinctively. They've had

businesses. Now, a lot of entrepreneurs, they do that instinctively. They've had

to do it. They figure it out. But sometimes just taking a step back and helping a leader, making sure a leader understands it. When I started as CEO, we took all of our leaders through a business driver meeting and training

that we did once a year, which was what are the business drivers? let's go

through an income statement and let's understand what are all the components of an income statement and we just did it for everybody just because it's also something that people assume they should know and so if they don't they often times feel embarrassed or they don't feel like they should ask and so we

would go through it and explain what everything is because ultimately finance is just a vocabulary and a language that you people if explained to can understand but if you've never been explained to it it's can be tough to

understand and you you you just need someone to walk you through it.

How do you evaluate integrity when it comes to hiring? We think of it as in one of those like cultural competencies and how do you assess it? So, one you can try to get to situational questions. You tell me about a time you, you know, struggled with

situational questions. You tell me about a time you, you know, struggled with something. Tell me about a time you made a mistake. Tell me about a time um you

something. Tell me about a time you made a mistake. Tell me about a time um you you did the wrong thing. Whatever it may be, and see what people share. We use it through our behavioral assessment. So like the it's actual way to um get at

sort of motivators and drivers and some of those things come through like integrity or others and then we get it at it through reference checks. You know

both ones they provide but also ones that they don't provide. Our view is like the hiring process is fundamentally you're trying to learn as much as you can about a person and how they'll behave in the role. You don't actually know until they get into the role, but you can improve your odds of success by

being disciplined on some of those dynamics. I remember that when I got hired at a three-letter agency and they were doing my background check, they talked to numerous references that I hadn't provided and I always found that an interesting insight because the ones that you provide are the least likely to

give insightful information. Yeah. Um, so they would go and they um they just talk to anybody in my life who would have been around like including a neighbor to my my house and like does he party? What time is he coming? Oh, I

don't know what questions they asked, but I always found it interesting cuz my neighbor came over one night to my mom. It was just like I always knew that boy of yours was going to get in trouble and it was just a background check like and it was a reference check and it was a really interesting way to find out information about people.

Yeah. Uh in a non-controlled sort of Yeah. It can be really helpful to see um what people share. We also in our interview process based off of who also um when you go through the top grading exercise, you know, I go through each

role you've had, what your scope was, what you did, what were your outcomes, but then I ask who your manager was. I write that person's name down. And so if you say your manager, Sally Smith, okay, okay, what what years was Sally your manager, you know, write them down. And what was Sally's role? Okay, she was the

manager of this. And then when I call Sally, what is she going to say about you know your biggest strengths and what is she going to say about your biggest development errors? And just shifting that from when from if like if I call

development errors? And just shifting that from when from if like if I call versus when I call people shift what they say they're more audit and also just by writing down Sally's name like I I know who your manager was now versus

you know often times you don't know who their manager was so you couldn't even get to it if you wanted. And so getting people to be more not necessarily more honest, but more direct and more forthright with what they're sharing is

a way to also get some of that out. And then ideally you do verify it and have those conversations and see if what they said and what Sally said match up. It's really helpful.

This whole world is so interesting to me because I for 15 years I effectively worked with people you could trust uh by default. there wasn't a it was a non-representative portion of society and then getting outside of that and

learning you know not everybody has integrity and not everybody does the right thing and not everybody is trustworthy and it's so weird just coming from an area where I would say you know a disproportionate percentage of people were uh had integrity and trustworthy and all of these things that

we look for on the outside and then you go outside and it's like whoa that's that is a non-representative sample of the population. Yeah. And I think like I by and large think people want to do the right thing and want to do good and are trustworthy.

But I think people have blind spots about themselves. They as you're talking they want to impress you. You know, it's a bit like dating where you're not always you're covering up a little bit and putting your best foot forward. And

we want to disarm people and try to get them to be as honest as possible because what we find sometimes is you could be a great person and really talented but just not be the right fit for what we need in this role. And so try to get people to be as upfront and honest and then ideally screen out those that

perhaps aren't. But you know our our view is we want to help everyone find

perhaps aren't. But you know our our view is we want to help everyone find the right role and right fit for them. Do you keep tabs on those people after?

So it's like oh this person was great. They're not a fit for this role but you know something comes up in 6 months and you're like oh yeah think of this person again.

Yeah we love to keep a talent bench. both people we've interviewed but also people that we just know and we think are impressive that you know if we have this type of role or in this geography that we can reach out to. Um we think it's a great way to cultivate talent um and sort of see opportunities but we

definitely like we'll get to know people and then a year two 3 years later there might be some role that's a fit that we end up working on. I always say life is long. You know, people come back in and out of your life in different ways. And

long. You know, people come back in and out of your life in different ways. And

um when you meet really great people, you try to keep them close because really great people just not only from a cultural or integrity perspective, but also from a competency and a capability perspective are rare to find that combination. So when you find them, you know, how do you keep them close?

combination. So when you find them, you know, how do you keep them close?

You've studied a lot of business history. I'm curious about some of the principles, lessons, and stories that you constantly find yourself thinking about. Oh, there's I think too many to tell. I mean, I think we've talked a lot

about. Oh, there's I think too many to tell. I mean, I think we've talked a lot about long term. You know, one thing that Warren always said to the CEOs is like think about this business as if it's your family's only asset and you can't sell it for 50 years. Make decisions with that in mind. And that to

me embodies like true long-term thinking, how to think about your business. And that's one that I sort of come back to. Now, maybe not be thinking

business. And that's one that I sort of come back to. Now, maybe not be thinking about every business for 50 years, but I think that's something I think a lot about. But I feel I I learned through those types of examples and those types

about. But I feel I I learned through those types of examples and those types of stories like most of us do I think and so trying to remember those is really valuable or you know Warren's comment on your reputation and if you lose money I'll be understanding but if you lose a reput a shred of reputation

I'll be ruthless. We think about that or you know the newspaper tests like if this were on the front page of the newspaper by a fair critical reporter that your family would read how would you feel about it? Things like that you always stand out to me. I want to speak just a little bit about inflation. How

do you think about inflation in relation to investing? Yeah. I mean, I think that um a few things. One is when we think about businesses, we try to find businesses

things. One is when we think about businesses, we try to find businesses that we think, and this goes back to like has the moat, is that typically they're a little bit more insulated from inflation because they usually can pass

it on to their customers. If you have a better business that's higher quality, that has a moat, you usually can pass on inflation. And so it's less it's an issue, but it's less of an issue um for the businesses that can do that. And so

we're trying to be thoughtful about that. Second, with our businesses, you know, even if there is inflation and we don't want to pass it on or pass on all of it, it's like how do we improve productivity in our business so that in essence we're combating some of the inflation we may be experiencing. And we

think most businesses can improve productivity you two to five percent a year every year just by being disciplined about it. And so that's a way to also counter some of the impacts with it. But I think that's like the level of how

we think about it in our businesses. You also have as you think about you new investments um what that means in terms of your willingness to pay the consequences with that ultimately translates into interest rates as well.

Those are all things that we factor in. That being said, like I've never been a macro investor. I think it's hard to predict the macro. It's hard to invest

macro investor. I think it's hard to predict the macro. It's hard to invest based on that. And so I'd much rather focus on the fundamentals of find high quality businesses at reasonable valuations that have good dynamics and

aspects of the business. And then you can absorb more dynamics like inflation or tariffs or things like that that are going to inevitably probably happen at some time in some space. The president today came out and suggested that financial reporting

should move to 6 months instead of quarterly. Um, so I'm wondering how you think about in terms of quarterly reporting versus annual reporting and

how that affects behavior of CEOs. Quarterly uh reporting, especially in the public markets, is a net negative for companies, for investors. I think

it's intended to provide transparency, but it it ends up doing short-term thinking. What am I going to do to drive the results this quarter? And you see it

thinking. What am I going to do to drive the results this quarter? And you see it all the time, right? I'm going to try to move sales into this quarter. I'll get a discount if you you buy my product this quarter. I need to like hit my number or

I'm going to invest in something that I can do this quarter or next quarter to achieve it. So, I think it fundamentally doesn't support what's best for the

achieve it. So, I think it fundamentally doesn't support what's best for the company and what's best for the investor. That being said, I think that you want someone and presumably I think the CEO can do it managing the business more frequently than every six months or every year. Like if you're only going to

look at your financials or your performance once a year or once every six months, I think you're going to miss opportunities to make adjustments where needed in the business. But I don't think you necessarily need investors to do that if you have the right management team and you have confidence. I think

the challenge is if you don't have the right management team, are you getting visibility into that and how to navigate it? I would probably heir on side of not having quarterly earnings because of all the negative aspects, but I think you've

got to solve that other issue in terms of are you managing the business close enough?

Are there public companies or public company CEOs that you admire?

Yeah, of course. I mean, I think there's business like I think there's different things that I'd say in terms of admiring. So I think if you look at like Danaher that business you Mitch Rails and Steve Rails and ultimately the CEOs that have followed is remarkable both the performance of the business the

success of the business how they've done it their system incredibly uh I have a lot of respect for them I mean if you look at Nick Howie of Transdime like the performance he's no longer CEO but the performance during his CEO you know

tenure was significant I mean remarkable performance and he had his own business system in terms of how he was doing that I think there's other people I have tremendous respect from like what they've accomplished. I mean, if you look at Bezos's build at Amazon, I mean, that's incredibly remarkable in terms of

the world and the impact that it's had. I learn a lot from other people who have come before us in terms of how they manage and what they do. I think the pressure is there's a lot for any CEO, especially public CEOs in terms

especially right now um of what they're expected to have a view on, what they're expected to manage, what you know the consequences of having those views and everything. I think is particularly challenging for any CEO but especially

everything. I think is particularly challenging for any CEO but especially those in the public public view. How do you think about the role of politics in sort of companies? Should companies have political opinions?

I don't think there's a right answer or a wrong answer to that. I think you need leaders who are authentic and genuine and if they are people who have views and share those views or want to share those views and that's key to who they

are in the business, I think that I can understand why they do that and the benefit of that. That being said, I think we're in a very divisive time right now. And I think sometimes people have a lot of views and they share those

right now. And I think sometimes people have a lot of views and they share those views and they assume their customers have the same views. And sometimes I think there's businesses where that may not be the best approach um for the

companies. By and large, my approach is I think that CEOs should be really

companies. By and large, my approach is I think that CEOs should be really thoughtful before they have views on topics publicly, especially if those are topics that their customers or their employees may have differing views. But

if it's, you know, a founder or someone who has strong views, I don't think they necessarily have to cover those up either. So, I think it's a little bit of a it depends answer, which is feels like a copout, but I think that's the best answer I've

heard in a long time. Tracy, we always end these interviews with the same question, which is what is success for you? Yeah, I mean success for me is really leaving things better off than I found them. And that is both in terms of

the companies I work with, the people I engage with, my family, building my own life and building the lives around me of the people around me to be something great that they care about that are special that are impactful and that are sort of creating value for them and creating value for those around them.

That's a beautiful answer. Thank you so much for taking the time today. Yeah, of course.

Thanks for listening and learning with us. Until next time. [Music]

Thanks for listening and learning with us. Until next time. [Music]