Mise en Place Investing | The Acquirer's Multiple®

In their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Mise en Place Investing. Here’s an excerpt from the episode:

Jake: What we’re going to be talking about is this French culinary concept called mise en place, and what it means in effectively an English is put in place or everything in its place. Really, it’s a mindset, and a practice, and a process to allow a chef to be super-efficient, and even perhaps achieve a bit of a flow state while they’re cooking.

Let’s walk through what the steps are to achieve mise en place, and step one is you read the entire recipe. Okay, that’s fairly straightforward. Step two, you prepare your workspace, and you clean it as much as you can, organize it so you know where every one of your tools are. Step three is you prepare all of your equipment. You clean it, and make sure it’s all functional. Step four is you gather all your ingredients and you put them into prep cups. Step five is you prep the ingredients such– you’ve chopped all your vegetables, you put all of the you know, let’s say we’re making omelet. You put all your cheese into a little measured it out into a bowl, and then you place everything at hand right where you know where it is, and maybe even in the same place regularly.

Then, the final step is really concentrating on the cooking process, because you know that you have all of the little details sorted out ahead of time before the rush of actually cooking, when there’s a timing element to all cooking. The amount of energy that the food absorbs over a given time period, the amount of work done on it really can have big impact on how does the final food output look like. So, the whole point is to make this process smooth, more consistent results, save time, actually, at the end, less surprises, save space, because you’re well organized on your table, and then achieve that flow state and actually make your cooking more enjoyable.

Well, shit. If that doesn’t sound like what you would want your investment process to look like as well, I think this is actually something profound here. Imagine having your bowl of chopped veggies right where it is, since we’re doing a veggie segment. Yeah, your cheese, your diced meats, your eggs already scrambled, and you have it all ready to go on the table. Then, the order comes in that says, “Hey, we need 10 omelets.”

Okay, well, I’m ready to bang those out right now, because I have them all at hand. I know where everything is, and I can really focus on the process. Whereas, if I’m standing there, and then that orders come in, and then, I have to go do all those little things, and maybe I’m trying to chop up the veggies, while I’m also scrambling eggs and it just can turn into a mess. You can see how you’re creating interconnectedness within the system like we’ve talked about, how errors propagate.

If you think about it, isn’t this exactly what Buffett does? He is reading all the time about different businesses, their 10Ks, industrial publications. How does a company fit into its competitive landscape, its ecosystem? What are its advantages?

He’s got a list in his head of companies I think that he would be pretty happy to own, and he’s got a pretty good idea of what he would pay where he would generate an adequate return over the time period of his ownership. Is that much different than having your bowl of eggs already pre-scrambled, your cheese ready to throw in?

So, then when the order comes in, when someone approaches him, when Mr. Market offers him a price for that company, this is why he can say in 15 minutes whether he’s interested in buying the company, and have a deal, and a handshake done in that short amount of time. It’s because he’s had a mise en place approach to being ready for when the opportunity shows up. Having all that cash is not much different than a bunch of cheese sitting in a bowl ready to go.

I think there’s something profound there for us as investors to think about doing a lot of the work ahead of time rather than waiting, and then scrambling to try to get caught up. Pardon the pun there. So, yeah, I don’t know. What do you guys think about that? I mean, is this–

Tobias: What’s your desk look like, JT? You’ve got a tidy desk? Tidy desk, tidy mind?

Jake: Yeah, it’s relatively tidy. I’ve got a little bit of– It’s not OCD, but I’m a little bit anally retentive.

Tobias: That’s your mise en place?

Jake: Yeah.

Tobias: Desktop of your computer tidy as well? Know everything is?

Jake: Pretty much. Yeah, there’s portions of where some things go–

Tobias: Got some junk, some miscellaneous folders.

Jake: Yeah, for sure. There’s miscellaneous. But for the most part, things have a place where they go.

Tobias: Do you keep a list of– I have an idea of the most profitable companies in the market by just in absolute terms like gross profitability, and then on various ratios like gross margins and gross profitability on total assets and things like that. So, I have a rough idea where the profit in the entire economy is going and then– [crosstalk]

Jake: It’s all ads. [laughs]

Tobias: It’s a lot of ads. Yeah, Walmart is up in there too. Facebook, of course, is up there. Then, you can run a simple cut on that– and is one of the things that I struggle with, where’s the appropriate place to cut?

Jake: Yeah.

Tobias: Because the valuation– what is too much to pay for these things? The answer over the last decade has been–

Jake: There’s no price.

Tobias: Anytime you try and put a cut in there. I think that’s a great approach. I 100% agree with that, and I like it a lot.

Jake: Bill, what do you think?

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