Invincible Industrialists | The Acquirer's Multiple®

During their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Invincible Industrialists. Here’s an excerpt from the episode:

Tobias: Bill and I recorded a long-form podcast on Bill’s new podcast called The Business Brew, which is a really fun format where it’s like– a long is like two and a half hours, you’re going to need bathroom breaks and fluids to get through it. I certainly did. [laughs]

Bill: Sorry.

Tobias: It was really fun. I tried to do it in the spirit that it’s intended, which is a pretty, pretty relaxed, so if you don’t like swearing, and probably don’t listen to it. I try not to swear so much on this, but I do swear in real life. One of the topics that we talked about, which is something that I’ve been starting to write a new book on this basis, it’s probably why my topics have been a little bit weaker on the podcast, because I spend all my time thinking about this stuff. I’m just really not interested in anything outside at the moment, so I’m digging on it pretty hard. We discussed this idea on the podcast.

I’ve tried to read Sun Tzu’s Art of War, I don’t know how many times. Probably, I have a go at it every five years and have done since high school. I’ve had five or six go’s at it now, and it’s impenetrable. It’s really hard to read. It’s never made any sense to me. But sometime in September or October, I read it. It spoke to me for the first time, which is really weird, because I think it’s one of those things that people like to say– I think there are works out there, there are texts out there that people like to say, “Oh, this really resonated with me.”

I think it’s one of those things you say just so that everybody’s, “Oh, he’s really deep and smart this guy, because it resonated with him,” but genuinely did for the first time, read it and understood it. I thought as I was reading through, it’s uncanny how much this philosophy that Sun Tzu speaks about, and he’s writing in somewhere 430 BC, 500 BC, which is 2500 years ago. I thought It’s uncanny how much what he describes the way he describes going about it matches up with Buffett’s process. Not so much Buffett’s process, but Buffett’s end goal.

The way I interpret what Buffett is doing, is he does everything that will make him more invincible. This is the idea of Sun Tzu, to try and find invincibility. The way that you do that is a variety of things. You have to think about what you do a lot before you do it, which is one of the things that Sun Tzu advocates and then you’ve sort of figured out what is the inevitable outcome or what must happen. You figure out how this thing wins before you engage in it. You figure out all the things that can go wrong. If those things are present, you just don’t do it. Really, that’s what stands out most about Buffett is not what he does, but what he doesn’t do.

As I’ve read through it, and I’m trying to write this down in a book, I’m at that point where I’m really tangled up and confused, honestly. I’m about 40% of the way through and it’s misery writing at the moment. I still think the idea is right, it might not be the best book I’ve ever written, but I still think the idea is pretty strong. It’s little hard to articulate, but the thing that…

Sun Tzu, Buffett & Boyd

Tobias: Sun Tzu by itself is very difficult to read I think. I’ve read lots of different translations of it, they vary materially in important ways. I’m justified in combining a few of them together, which is what I’ve ultimately ended up doing. I found it harder to understand until I read John Boyd.

I think he is the basis for Maverick in Top Gun when he was a younger fighter pilot and he was sent to Korea, didn’t see combat, but did some interesting things like the pancake maneuver, going to slam on the brakes and then fly right by which they do in, Maverick. He was regarded as a maverick, which I think is where the name comes from, was about to be deployed to Vietnam, was called back to the Pentagon to advise on a new plane and he developed this theory as he was developing the plan.

He gives this presentation called Patterns of Conflict, which you can find online as a PDF. You can also find him delivering the presentation in four parts on YouTube. It’s hard to hear, but it’s definitely worth going through it because he illuminates some of the things about Sun Tzu that are a little bit more subtle that I certainly missed when I first went through, but when I went back having read Boyd, it did make a lot more sense to me. I think that Buffett makes a lot more sense.

I think you can understand Buffett without value if you understand Sun Tzu and Boyd. The theory is basically, it sounds aggressive and it sounds warlike, but it’s not at all because what Boyd emphasizes at the first, at the outset, is you need to have– to succeed as a nation, to succeed as a company, as a business, to succeed as an organic entity, as an individual, you need this idea of harmony, which is everything working together and doing things that are noble and good.

The reason that you do those things, draws the uncommitted to you draws enemies away from the other side, adversaries towards it, does all these things that make you– put you on the path to invincibility. At the same time, you’re trying to avoid things that risk ruin, which– that’s what Buffett does. That’s Buffett all the time. You think about what Buffett does when he talks about– when he’s liquidating Berkshire Hathaway, which he did, he sold– He slowly liquidated– he didn’t like the response when he liquidated Dempster Mill. When it came to liquidate Berkshire Hathaway, did it in a slightly different way.

He writes in those letters that it wouldn’t have made Karl Marx or Adam Smith happy. He’s clearly thinking about making– He’s clearly pursuing harmony, I think. He’s doing it in the people who he wants to associate with and he writes– I think He writes all this explicitly.

When I go back, having read Boyd and Sun Tzu, and I go back now on a read Buffett, it’s clear to me that he’s been articulating these same principles for 30 something years longer, probably, if you could go back further. That’s the thesis of the book. It doesn’t mention value, and it doesn’t mention Buffett. I’m trying to write it without those things in there, but it’s pretty clear who I’m modeling the book on. And it’s called Invincible Industrialists. It’s a working title at the moment, it’s going to take me months to get this thing out. So, it’s not coming out anytime soon, but we discussed it on the podcast in some depth, and at some length. So, that’s my topic for today.

Jake: If I remember the biography right, Boyd was instrumental in the design of both the F-16 Fighting Falcon and the A-10 Warthog.

Tobias: That’s it.

Jake: Those are both pretty badass planes.

The OODA Loop

Tobias: The Warthog is a bathtub, strapped to the top of a gigantic gun that flies very slowly, but is quite maneuverable. He fights the whole way through to keep them fit for the purposes that they’re designed because everybody wants to add all this other stuff in, make them heavier and less maneuverable, and he keeps on pushing this idea of maneuverability, which is– Boyd is famous for the OODA loop, O-O-D-A. Observe, orient, decide, act.

He uses that in the context of a dogfight in the air, so if you can get inside the turning circle of another plane of your adversary, then you can hose them is the term that he uses, which is shooting them because the bullets come out delayed, and it creates this water effect, like a hose, water coming out of a hose. But then, he applies it to warfare more generally.

If you can get inside the decision-making loop of the enemy, of the adversary, whoever’s making the decision to whoever’s undertaking the act, if you can get that process going faster than them, then you’ll defeat them because you’re acting on more recent information, you’re implementing it. He looks at the blitzkrieg, which was the German method for attacking in World War II, which grew out of the losses that they sustained to Napoleon, funnily enough, and he says why Clausewitz is wrong. It’s fascinating stuff, but basically, he takes that OODA loop and he expands on it even further in the presentation, which is how I’ve come to understand how he thinks about–

The presentation in and of itself is fascinating, but also the way that he does the presentation because he starts out saying this is what it looks like in a dogfight. This is what it looks like in various different battles. Then, he keeps on abstracting back until–

Jake: Kind of fractal.

Tobias: Yeah, until he gets to this point where it’s like at the– fractal’s good word. Yeah, that’s exactly right. He gets back to the grand strategy, national goal. And he says, this is why you need harmony at the grand strategy national level. Then he proceeds back from that sort of grand strategy all the way back down to tactics and so he uses it, he applies the idea for a counter blitzkrieg and how you could counter the blitzkrieg. It’s incredibly clever stuff. I’ve been immersing myself in it and learning a lot. I haven’t had any really great insights from it yet, but it’s certainly fascinating stuff.

Jake: Some day.

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