During their recent episode, Taylor, Carlisle, and Colin King discussed:
- Return on Headache: The Hidden Metric in Small Business Investing
- How to Spot a Good Private Acquisition: Paying Half of Revenue and Scaling Smart
- Why the World Needs a Little Bit of Crazy: Entrepreneurs, Elon Musk, and Creation
- Engineers vs. Lawyers: Why China Builds and America Debates
- Super-Normal Earnings and the Coming Value Opportunities
- From Craigslist to 15 Acquisitions: How Colin King Built Circle City Capital
- Why Colin King Says 9 Out of 10 People Shouldn’t Do a Search Fund
- Smart Compounding: Patience, Value, and Playing the Long Game
- Private Vices, Public Benefits: Jake Taylor’s Modern Take on The Fable of the Bees
- Why the World Needs a Little Bit of Crazy: Entrepreneurs, Elon Musk, and Creation
- The Hidden Value of Exploration: Lessons from Mining, Oil, and Buffett
You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:
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TRANSCRIPT
Tobias: I think we’re live. It still says it’s preparing, but I think we’re live.
Jake: Just go.
Tobias: This is Value: After Hours. I’m Tobias Carlisle, joined as always by my cohost, Jake Taylor. Our special guest today is Colin King. He’s Value Don’t Lie on Twitter, and his Circle City Capital Group. It’s a small business, private equity using his own capital. We’re going to find out more right now. How are you, Colin? Nice to chat to you face to face.
Colin: Yeah. Hey, thanks for having me on. I’m doing good today.
Jake: Welcome.
Tobias: Tell us a little bit about Circle City Capital Group.
From Craigslist to 15 Acquisitions: How Colin King Built Circle City Capital
Colin: Yeah. I guess if I could rewind and go back a little bit further behind that. Just my quick background professional career started as a CPA. Got my CFA, worked on the buy side at a fund, doing long-only GARP special situation kind of investing. That’s really where I got into the value investing philosophy.
I met my business partner while there, and we both had this idea that, “Hey, we could buy a private company together,” really before this whole entrepreneurship through acquisition thing took off. Drawn to the idea of buying cheap cash flow. Maybe it’s passive income or whatever. [Jake chuckles] And so, we set out on the path to look at companies. We spent maybe a year looking at companies together. Bought our first company together in 2018. And since then, it’s just been a cliche snowball of accumulating things.
So, we haven’t started anything from scratch. And really, we’ve funded through the SBA and bank financing, so we’re still pretty highly levered. But it’s mostly a bootstrapped company. It’s not really a thematic play, like we’re pretty opportunistic looking at interesting deals. My original thesis was take the things I learned investing in the public markets, try and bring that to the private markets and my partner is more of an operational sales and marketing type person. He used to work at Google. So, it’s a nice partnership where we bring different skill sets to the table.
So, we’ve done 14 acquisitions since 2018. We actually are getting ready to close on number 15 here in the next month. It’s four groups of businesses that we run today, so several of those were tuck ins. We got a consumer business. We make flannel, we make teddy bears, we make blue jeans. We sell that online. And in a fleet of 10 brick and mortar stores, we’ve got a distributor of Montessori school supplies, a distributor of home decor products and then a financial training in the education company, soon to be an accounting firm as well. So, that’s what we’re into.
Tobias: Tell us a little bit about your first acquisition, and what you’ve learned along the way.
Colin: Yeah. [chuckles] Everyone has just been a series of new learnings, right, lessons to [Jake chuckles] apply to the next thing. So, the first company we bought together– [chuckles] Joe and I met on Craigslist. So, back in, let’s see– When did we meet? We met in 2017 maybe. We both had this theory that, “Hey, if you’re a business owner of a really small company and you don’t know what to do with your company, you’ll just put it on Craigslist.” Maybe that’s Facebook marketplace today, but whatever. So, he had a post looking to buy a company. I thought it was too well written to be some sheisty person. So, I reached out, and we just hit it off and kept conversation going from there.
Jake: Casual business encounters? Is that what– [crosstalk]
Colin: Yeah, casual. [chuckles] Yes, exactly. So, we found a company on Craigslist about a year later. It was a little trucking company delivering automotive parts in the middle of the night. So, we bought that business with our own personal savings in 2018. If you go get your car fixed and the dealer is like, “Yeah, we’ll have that part tomorrow,” we were the guys that would show up at 4 o’clock in the morning delivering that part to that dealership. It was a horrible business. [chuckles] The first night that we showed up, I think two drivers called in sick, and so the two of us were popping in a truck like day one to go do this stuff.
[laughter]Jake: Ink’s not even dry on the contract. You’re ready.
Colin: Yeah, exactly.
Jake: Passive income. [laughs]
Colin: Passive. Yeah, highly passive. So, the lessons were immediate. But it was good cash flow. It was a good cash flowing business, we had a nice contract, but operationally it was a disaster. So, we ran that business and ultimately brought a management team in, installed a backup driver system and we’re able to peel ourselves out of it and sell that business about a year and a half later.
Tobias: And why did you sell? Because you’d solved its problems or you didn’t want to be doing midnight deliveries?
Return on Headache: The Hidden Metric in Small Business Investing
Colin: I can’t claim this term, but someone along the way mentioned the term return on headache to me, and that was just so true. It was disastrous for our marriages, disastrous for our personal lives. It just did not check any of the boxes, even if it was a good returning asset. So, I still have PTSD. I’m checking my phone at 2 o’clock in the morning like, “Is someone’s truck broken down 300 miles away from me? Do I need to go deal with this thing?” So, it just wasn’t a business model that we could see ourselves running and owning for a long time. If you can’t do the thing of a company that you own in a small business land, you probably shouldn’t own that company.
Tobias: So, that was an important learning that was like return on headache is a key metric. So, how did you then start thinking about acquisitions after that? Did that sharpen up a little bit what you were prepared to do?
Colin: [laughs] Yeah, so, we rolled the proceeds from that into an e-commerce company. This was back in 2019. And really the thought was, you know it’s a way more flexible business model, you don’t have to be physically located somewhere to store, pick, pack and ship a product. We used a 3PL. So, we were more drawn to that flexible lifestyle sort of business.
So, now, most of our companies operate remotely with the exception of production employees, and retail employees and such. But all of our knowledge staff, they’re scattered throughout the country. So, we started going down this path of, can we lead with a better, more flexible operating style of the businesses we buy?
Tobias: Talk us a little bit through, like, what’s a prototypical acquisition look in terms of ratios rather than– You have to give us the raw numbers just in terms of debt, equity, revenue multiples or EBITDA multiples.
Colin: I view it as a stair step. So, in the early days, our first deal we just bought with cash with our savings and we didn’t borrow any money to do it. And then, when we sold that business, the next company went out and got an SBA loan to buy. So, we were putting 10% down, borrowing 90%. In total dollars, it was still pretty small. I mean, it wasn’t a huge purchase price. We paid maybe half of revenue for that company when we bought it. So, it was attractive, earnings multiple. But we had to step in and play several roles in running that company. There wasn’t a marketing team, there wasn’t any strategy, there was a lot of administrative stuff to pick up.
How to Spot a Good Private Acquisition: Paying Half of Revenue and Scaling Smart
So, if you were to include in your own comp in that multiple, it would be less attractive. But we stuck to paying half a revenue or 3/4 of revenue and just about everything we’ve done since then. And the real benefit is when you get to this critical mass area. So, as a company gets larger, okay, now I have one person who’s dedicated to running retail and one person who’s dedicated to running ops and one person dedicated to this. So, that scale, it’s a real thing. So, we’ve benefited as we’ve graduated up that curve.
But in the early days, it was highly levered, 10 down, 90 borrowed. In some cases, we had earn-out structures and then really in our last– Let’s see, the last couple deals we’ve done have been more in the 25, 30 down, maybe some rollover equity from the seller and then borrow the remainder.
Tobias: How often are you doing an acquisition? You’ve almost done 15 since 2017. So, a couple a year more than that?
Colin: Yeah, at least one a year. So, we’ve done one every year since 2018, at least one. I would say at this point now, [chuckles] it comes down more to how much bandwidth do you have. So, if we were to buy a new company, it would either have to fit within an existing operating group that we have, so that team could go run it, or if it were going to be an entirely new platform, so to speak, then– We’d have to look at each other and say, “All right, who’s going to run this one?” There’s only so much time in the day, so it has to be large enough that we would have an operator who could take it on. So, yeah, the criteria has changed.
So, last year, we bought a company called Vermont Teddy Bear, which was a pretty sizable acquisition, just shy of $10 million in revenue. And so, that folded within our consumer group. They’re running that business. And the company that we’re closing on here in the next 30 days is an accounting firm. And so, that will tuck within our profit mastery financial training business, so they’ll go hand in hand. So, I’d say most everything we’re looking at now is really dedicated to, does it fit within the portfolio?
Why Colin King Says 9 Out of 10 People Shouldn’t Do a Search Fund
Tobias: So, we’ve seen this rise of search funds or entrepreneurship through acquisition. Do you have any advice for people who are thinking about going down that path, and what should they watch out for? What should they look for?
Colin: Yeah. So, for 9 out of 10 people, I would tell them not to do it.
[laughter]Colin: Just like full stop. I’ve had a couple people reach out to me wanting to ask questions, “How do you do this? How do you approach that?” I actually think the right thing to do, if someone’s interested in that space is to go find someone who owns a company and see if you can work in that business. It’s kind of a shadow to the owner, like, be the right-hand person for a period of time, because you’re rolling up your sleeves, you’re doing a lot of stuff and it’s not–
Everything looks awesome on a spreadsheet, and you think you’re just going to be a passive owner and you’re managing people. It’s just so much more than that. There’s just a lot of little thing. I can’t even come up with examples, because this stuff, you just don’t know what you’re going to get into each and every day. So, getting your hands dirty and seeing what it’s like on the ground floor, I think that’s the best place to start to see if it’s something you could see yourself doing,
Jake: That’ll cure you. [chuckles]
Colin: Yeah. If you can’t do the thing that the business does, then you really have no business buying it. So, that’s really where I would guide most people.
And then, most of the search funders that I see, they’re all looking for larger companies, maybe a million in EBITDA or more and growing or HVAC trades, whatever. I would actually take the opposite end of that and say look smaller, so maybe 100k to 250k of earnings and then, the risk is lower and the complexity is lower and the blowup potential is lower. Maybe you’re more hands on, more involved, having more hats in that business, but it just will be easier to get your arms around.
And then, if you want to, you can come back later and bolt something onto that if it’s going well. So, I would be more inclined to do that and maybe cobble together two or three 250k earnings businesses than to try and find one-million-dollar EBITDA business that I think I could add a ton of value to.
Jake: I have some friends that do something similar to this. They’ve also focused on a pipeline of people and developing probably younger talent to then be able to put into the business internal search fund practically. Have you explored that?
Colin: Yeah. It’s funny. That’s where my partner and I are looking at each other and saying, “What’s next?” We have a slate of businesses, we like what we own and we like the people that run them. We’re still involved in some of the smaller ones tactically. But I would love to find someone like me 10 years ago and say, “You want to buy a business and I’m confident that you know what it takes to run a business.” Maybe they intern or shadow with us and then help back getting a deal done together, that’s pretty interesting.
I don’t have to own 100% of everything that we do. It’s not really high on my checklist. So, we’ve talked about that, we’ve talked about doing some stuff in the public markets. I still love following the public markets and doing some activist sort of things on the smaller end of the spectrum, because now we’ve seen what it’s like to acquire a business or to grow a business or to turn a business around. And so, if we can bring some of that expertise to smaller public companies, that would be pretty fun too. You don’t need to own 100% or even 50% of a public company to have some influence there.
Tobias: Let me give a quick shoutout. Lausanne, Switzerland. Breckenridge. Tallahassee. Toronto. Valparaíso. What’s up, Mac? Östermalm, Sweden. Singapore. Danny Beltran’s in Boston. What’s up? Banja Luka, Bosnia.
Colin: Nice.
Tobias: Toronto. GX. Sorry, I don’t know what that is. You have to [Colin chuckles] spell it out for me, team. London Town. Fremont, California. Bologna, Italy. What’s up? [chuckles] Jupiter, Florida. Ben from Boise says, “What’s up, Colin? How are you?” Lot of you–
Jake: Colin, what did your public market expertise from before come in most handy for on the private side?
Colin: Yeah. It’s funny, when we started, [chuckles] I told myself, okay, let’s steer clear of a couple of industries, like restaurants and retail, consumer. And now, here we are, like, consumer and retail is our largest business. But it Just it helped me look for things like niche industries, niche markets, appreciating recurring revenue, appreciating proprietary products, and the power of a brand and exclusive supply relationships. So, I think it’s added some little pieces that I’ve appreciated. But really my experience being an accountant and then being in the public markets has really made the due diligence process that much better for us.
And then, my partner having a nice ops background, I think that’s what’s brought the most value here. Being able to speak public markets and put a balance sheet together and figure out how to craft a capital structure, that’s not that easy. Even through the SBA, I see a lot of business owners not have enough working capital, or not think about working capital or not think about a line of credit or they’ll look at a business and they’ll look at the full year results. And then, you get down to the monthly or weekly view and you’re like, “Holy crap. This business is crazy seasonal.”
What’s the Howard Marks quote? It’s “The six-foot tall man who’s crossing the river that’s five feet deep on average.” You got to make it through the year to get to that full year result. So, just little nuances like that I’ve appreciated. Yeah.
Jake: Yeah. I think Buffett said even See’s Candy loses money nine months out of the year.
Colin: Yeah. Yeah. yeah, absolutely. So, our flannel business– Nobody’s buying flannel in July. [Jake chuckles] From January to August, it’s a horrible business. I shouldn’t say that to anyone who’s on our team listening to this.
Jake: I love you, guys. [chuckles]
Colin: I love you, guys. But it’s hyper seasonal. It’s insanely seasonal. And so, on a full year basis, it looks amazing, but you got to get to September, you got to get to the selling season.
Smart Compounding: Patience, Value, and Playing the Long Game
Tobias: We’ve got to ask about your smart compounding strategy.
Colin: My smart compounding strategy?
Tobias: That’s what I’ve got, ask him about his smart compounding strategy.
Colin: Oh, gosh. Oh, man. I haven’t trademarked that. [Tobias laughs] I don’t know if I have a good compounding strategy other than– I think from that standpoint, I’ve met a lot of people who want to get rich quick and whether it’s public or private stuff. And for me, it’s taken years of patience to build what we’ve built. But I’m a die-hard value investor, both public stuff and private stuff. I want to pay a fair or good price for whatever I’m buying, and then hold some of the levers to get the upside and then just be patient with it. I don’t know, that’s been my approach both publicly and privately.
Tobias: Yeah, that’s really out of fashion, that approach.
[laughter]Jake: Yeah. Have fun staying more with that. [laughs]
Colin: Well, that’s why I love having the private stuff. So, when I set out to do this, I really wanted to be able to float between the two worlds, and I absolutely do. So, I’ll go a week or two weeks sometimes if I get really busy on the private stuff and will not pay any attention to the public markets. And then, I’ll pick it back up and I’m like “Oh, whoa, okay. There’s some interesting stuff going on here.” So, I am not necessarily a full-time public markets investor and I’m not necessarily a full-time private market investor either. I like living in that in between.
Jake: Any aspirations to reverse merger into an IPO hold code?
Colin: Yes, yes. Can I tell you about that? Oh my gosh, I have a huge desire to do that. So, there’s this thing called CF reg crowdfunding. Basically, you can raise money from your customers, which is one of the most attractive ways to raise capital. And not that we would want to take advantage of our customers or anything, but you give them an opportunity to buy in, they don’t have to be accredited and the minimum investments are low.
Jake: Is this like Kickstarter?
Colin: Basically, Kickstarter, for a small business. The requirements are if you have reviewed financials, which is a step below an audit, you can raise up to $1.25 million annually from your customers. And if you have audited financials, you can raise up to $5 million annually from your customers. What that does is if you’ve got a large enough customer base, which in our consumer business we do, we’ve got, I don’t know, maybe a million people on our email list, then you have a wide shareholder base.
So, I can raise capital from my customers. I’m a C-Corp setup. It’s like an SEC light kind offering. Now, I have a large shareholder base. And if I do that as step one, then step two, I could go find a market maker and put my shares on an exchange and get a quote. So, I don’t have to IPO, because I’ve already raised the money from my customers, created that large enough pool of ownership.
Jake: How do you determine valuation on that?
Colin: So, the exchange, these are FINRA regulated entities that do these Reg CF offerings. There’s a couple of them out there. Republic is one, republic.co, StartEngine, Wefunder. So, you can look them up. You can go see these companies that they’re issuing capital for and you can invest in them if you want a couple hundred bucks a pop usually. But valuation, they work with you to determine what would make sense. I think it still has to fit. It can’t be outrageous.
Jake: You’re going to have to wait till a SPAC to do something really stupid, right?
Colin: [laughs] I looked at a couple of the deal profiles that were on there and people were picking it apart. So, they were asking some good questions. But anyway, that’s my dream. I’m still trying to convince the management team of that business that it makes sense to do that though.
Jake: Any sense of how much it costs to have your own liquid little market for your internal shareholders on annual basis?
Colin: Ooh, no, but that would be amazing. I’m going to write that idea down.
Tobias: I guess you could have a wide [crosstalk]
Jake: I know some of the VC world. They have some of these secondary– They’re effectively private markets to allow people within the capital structure to change seats, but-
Colin: Yeah. Yeah, yeah, yeah.
Jake: -a lot of them are negotiated transactions.
Tobias: Do you think of it like a conglomerate or does each business is its own– Is it like a private equity firm which each acquisition is its own thing or is it conglomerate style where you like–
Colin: Yeah. Everything runs on its own. So, we don’t force shared services on anyone. You can go get your own tech stack for this business, that business, whatever. I will say the largest company to the next largest company is a pretty wide gap. So, Joe and I have, I would call it, a full management team in our largest company and then the next two smallest have a GM running them, someone who understands the business, understands the ops, but they need help setting strategy or managing the P&L. And then, in one of the businesses, I sit in the driver’s seat for that as CEO. So, it’s– [crosstalk]
Jake: What if they are going to buy teddy bears, they have to buy Vermont?
Colin: 100%. Yeah, yeah, 100%. There’s only one flannel supplier.
Jake: No negotiating on that. [laughs]
Colin: No. Zero negotiating on that. But no, we don’t force shared services. Like I said, this has just been totally and completely opportunistic, just bolting things on as we go. We’re not trying to set out to create some end game and reverse engineer that.
Tobias: We talked about this a little bit before we came on, but there is this wave of– It’s been around for a long time, but it does seem to be getting louder and louder, this wave of entrepreneurship through acquisition or search funds. Have you seen increased competition? Have you actually seen more people out there trying to buy alongside you?
Colin: We don’t compete in auction processes, so I don’t know that we’ve ever lost a bid from that standpoint. Most of the companies we’re looking at, I think most people would not be interested in buying them for one reason or another. I do know there are more buyers out there. I get emails all the time from ETA folks who want to ask questions or want some guidance.
Tobias: You got to start a consultancy.
[laughter]Colin: I don’t know. [crosstalk]
Tobias: Hire one person.
Colin: [chuckles] So, it does feel like the buyer pool is, has increased. I haven’t really seen and I don’t have any definitive data on this. I haven’t looked it up. But I don’t know that the supply of businesses has necessarily increased to keep up with that. So, it feels like demand is up, but supply is flat of businesses available.
I don’t know how that changes depending on size, like one million above or below from an earnings standpoint. But it feels there’s more buyers and fewer businesses to go around, at least at the moment. So, the silver tsunami or whatever you want to call it,-
Tobias: Yeah.
Colin: -I don’t know that I’ve seen that playing out. And multiples seem to be getting richer, not cheaper in private stuff, even on the small end.
Jake: Silver tsunami has been discussed since before Toby and I were silver.
[laughter]Tobias: That’s right.
Jake: I didn’t realize we were the silver tsunami.
Tobias: When I started 20 years ago, that was what people were. More than 20 years now, that was the silver tsunami is coming– [crosstalk]
Colin: That was the name of it even back then?
Tobias: Yeah. That was when the boomers, I guess– What are the boomers now? Are the boomers 1980? No. So, I guess they were–
Jake: No, they’re little bit younger than–
Tobias: What’s the first boom of 1945?
Jake: Yeah, something like that. Maybe a little bit older.
Tobias: That’s right. 1945 to what, 1955? 1945 to 1955. That’s 1970 to 1980.
Colin: Yeah.
Tobias: So, they were 1950 to 1960 then, which is like that’s probably right. There was a silver tsunami coming. [Jake laughs] It’s still coming.
Colin: I think that’s absolutely right. I think most owners of companies are holding on longer and can, especially if they’ve built a larger company with team around them and stuff. Most of the deals that we’ve done have had, I would call it, low 70s aged sellers. So, yeah, I don’t know, I haven’t seen it yet. I think they’re willing to hold on longer. And the mispricings, they’re not there quite like they are in the public markets. You’re not going to buy a business at 1X earnings unless you can bring something really uniquely value add to that situation.
Tobias: Do rates impact? Was it zero rates when you started?
Colin: It was. Yeah, let’s see. When did rates really start kicking up? Really around pretty–
Jake: 2022?
Colin: Yeah. COVID. So, rates were near zero. So, borrowing was pretty cheap. If you’re borrowing with the SBA, the 10-year AM., it’s the amortization that matters in these small business deals. So, if you’re AM-ing your debt– If you are 90 or 75 levered, then the AM is going to matter way more than the rate, So, a 10-year AM loan will give you plenty of flexibility if you’re paying a low enough multiple for it.
But once you get out of the SBA and do conventional stuff, then they’re like “Yeah, here’s a 5-year AM, or here’s a 3-year AM or a 4-year AM, because they want it to match the collateral, the tangible assets in the company. That’s when things get real dodgy, especially with the rates. You’re like, “Oh whoa, wait a minute, that’s a lot of cash outflow.”
Tobias: Yeah.
Jake: Yeah, you want that 10-year fixed balloon payment.
Colin: For sure. That’s the secret sauce that makes it work. Without that, it’d be pretty challenging to buy a company and wouldn’t no way would it work at 10 down 90 borrowed. And even 10 down 90 borrowed, knowing what I know now and where I’ve been, I don’t think I would do that again. I think there’s time and place for that.
Jake: Yeah, I was going to ask you, do you feel path dependency risks with that kind of leverage profile?
Colin: Yeah. So, fortunately, we’ve aimed a lot of debt that we have. So, we still have leverage, but nowhere near what we had when we were doing in the early days of SBA loans. I couldn’t tell you how many times I’ve used the phrase, “We’re flying too close to the sun,” to my partner.
Jake: [laughs]
Colin: And so, I just don’t want to do that anymore. So, I think if we were to do anything from here on out, we would either bring in equity or we would borrow way less than we have in the past.
Tobias: Is that success that’s making you feel that way or is that just a reality of the–
Colin: I think, I don’t know, maybe a little bit of both. I think if you get some scale and you see some success, there is some truth that you take your foot off the pedal a little bit. So, early on, a million-dollar deal, I think we both would have looked at each other and said, “Yeah, let’s lever it up and go do it. We can make it up. We can make it work.” And once you’ve accumulated something, you have something of value, it’s like, “Okay, well, shoot, I don’t want to lose it.” I don’t want to lose it because of these other things.
Jake: Don’t risk what you have and need for what you don’t have and don’t need?
Colin: Exactly. Yeah. So, I think that definitely changes some things along the way. So, we would probably invest a little bit differently today, unless an absolute game changing situation came along.
Tobias: I’m surprised that we haven’t seen more of the silver tsunami or the search fund. I feel that’s been coming for a long time. I feel the boomers are running out of runway a little bit, like the older boomers are running out of runway.
Colin: Yeah. Really, I think about those businesses. So, think about the comment I just made.
Jake: Toby’s trying to kill your grandpa, by the way.
Colin: [laughs]
Tobias: I’m not. The reality is the reality.
Colin: Well, so, the thing about how much they’re taking their foot off the pedal. If you’re 75, you’re in full on protect this thing mode.
Tobias: Yeah.
Colin: So, you’re going to pull back massively from a risk-taking standpoint and just keep it down the fairway. And then, you’ve got COVID impacting results in a lot of industries. So, it’s like, “Oh man, it gets kind of murky.” But it could create really interesting opportunities if you find a business where the owner took their foot off the gas, and you can come in and just do one or two or three pretty simple things that they were either unable or unwilling to do, like, that could be pretty fascinating.
Jake: I’ve heard some convincing arguments that AI might actually be more readily applicable to smaller businesses when things are just on paper or like-
Colin: Oh, absolutely.
Jake: -incredible labor savings you might be able to– Or, efficiency gains you could find.
Colin: Build me a template. [laughs] Yes, absolutely. The amount of manual stuff, it would blow your mind even at the larger side of the spectrum. We bought a business with more than $5 million in revenue and they didn’t have online banking. And it’s like, “Okay, [Jake laughs] let’s go figure that out. Let’s just do a couple of things here.” So, yeah, you’d be shocked at the way that some of these things operate.
Private Vices, Public Benefits: Jake Taylor’s Modern Take on ‘The Fable of the Bees
Tobias: JT, top of the hour, you want to give us some vegetables?
Jake: Yes, sir. So, this is a segment that’s on the fable of the bees. We’ll get into it a little bit more. But one of my deeper held beliefs, is that capitalism provides the biggest pie. And also, generally, business done right is very win-win oriented and is pro-social. But it’s always good, I think, to try to kill your babies whenever you can, or kill your darlings, I should say. That was a weird way to say it.
[laughter]So, this is a little bit of an exploration in that direction. And so, we’ll kick things off with a little bit that. So, saints give the great speeches, but it’s the strivers and climbers who actually pour the concrete. Our highways aren’t paved with virtue, they’re paved with vanity. And that’s why they exist at all.
Or, so thought a man from the early 1700s named Bernard Mandeville. He wrote that private vices, public benefits. He has a strange little poem, and it was later expanded into a book which was called The Fable of the Bees. And in the book, Mandeville imagines a thriving beehive filled with liars and cheats and gluttons. And every bee is incredibly selfish. Every bee is vain. Yet the hive is prosperous, rich, inventive, full of energy.
But one day, the bees decide they’re going to become virtuous. They give up greed, they stop lying, they live simple and honest lives and the hive completely collapses. Without vanity, there was no fashion. Without ambition, no innovation. Without envy, no progress. And Mandeville’s moral was, “A society without vice doesn’t survive.”
Now, this idea shocked a lot of people 300 years ago, and it still does today. Because Mandeville’s claim is not just economic, it says something profoundly uncomfortable about us as humans. We need flawed motives to do great things often. We like to think that progress comes from all these noble intents, compassion, curiosity, justice, love of truth. But if you scratch the surface, you might find something a little bit messier. People start companies just to–
Tobias: Impress a girl.
Jake: Well, yes, that’s correct. You’re jumping to the punchline.
Tobias: Sorry, sorry.
Jake: Yeah, no, that’s okay. You’re right. You think it’s like to serve others, but often maybe it’s to prove something to the world, to their parents, to the haters. And maybe if we dig deep enough to curry favor with the opposite sex.
Tobias: Sorry, brother.
Jake: No, no, it’s good.
Tobias: Skip on that one.
[laughter]Jake: Even acts of charity often carry these traces of pride or guilt, like, why else put your name on the building. So, Mandeville’s genius was to say, “That’s fine, that’s human. What matters is not purity, but direction.” He looked at society the way that a naturalist would look at anthill, with a detached curiosity, like, “What keeps this thing moving? What sustains the energy?” And the answer, he found, wasn’t virtue. It was appetite and avarice.
We’re driven forward by our wanting, often magnetic in nature, by advertising manufactures lack and then rents you the relief. While we like to moralize about these factors, civilization itself may actually depend upon them. And so, Mandeville understood what economists like Keynes would later formalize into overly precise mathematics. Demand, even wasteful demand, keeps the world turning.
Now, granted. Some vices don’t create. They cannibalize. Fraud, coercion, zero sum gambling dressed up as innovation. These probably aren’t really fuel. They’re probably more like fires in the rafters. But it’s never been easier to chase that dopamine hit of gambling in every spare moment. Sports betting, prediction markets, fantasy football, even large swaths of the stock market today. It’s really a gambler’s paradise. And I’ll leave you guys– I’ll let you openly debate the merits of OnlyFans different vice.
So, the question isn’t really like, is it vice or virtue? It’s which appetites compound, which destroy and what guardrails turn this heat into light? Maybe how can we price externalities, punish predation and reward creation over extraction? So, we often hear that to better humans, we must overcome our desires, our base instincts. But maybe it’s the opposite. Maybe the task is to work with them, to transform them, to give them purpose. And that’s why I think Mandeville’s phrase, “Private vices and public benefits,” might still resonate today, even three centuries later. This hive has necessarily disappeared, but it’s definitely gone online.
Open on a scene in a creator’s analytics dashboard at midnight, following counts of ticking follower counts and brand emails, pinging a half-edited reel, waiting for the perfect hook. This digital economy really runs on vanity, and envy and attention. And social media has really turned all of our narcissism into infrastructure. So, it’s really the hum of the hive there. All of our private impulses to be seen, to be admired, to belong, have really been monetized against us.
I think Mandeville would have understood all this perfectly. He would have said, “Of course, that’s just the hive humming on hypocrisy.” So, I think we’ve taken a lot of these moral revolutions and even monetized them. So, green products, ethical fashion, socially responsible investing, they let us feel virtuous without really changing that underlying engine. Mandeville would probably suggest that humans can’t escape their drive, so we need to learn to rebrand them and we try to domesticate them basically.
I’ll try to wrap this up now. Three centuries later, the hive is still humming. There’s this uncomfortable takeaway that perhaps we don’t rise above our motives, we just ride them. Probably the work then is to choose better saddles at that point, build the rules that can help price externalities, reward creation, turn status seeking into service. Maybe not expecting purity from everyone, but opting for better plumbing.
So, I try to go a little bit counter to my pro-capitalist ways that I quite have a high proclivity toward, but just pointing out that maybe there is a little bit of a seedy underbelly sometimes that it’s easy to forget about.
Tobias: That was a good one, JT. Maybe one of your best.
Jake: Really?
Tobias: Folks say, “Very uplifting veggies.” Ray Polk says, “I live a life of virtue built on a throne of vice.” [Jake laughs] I like that. [Colin laughs] Something like that. I think that even the gambling, whether it’s that poly market style where you can gamble on the outcome of presidential election–
Jake: Fucking anything.
Tobias: Anything. Yeah.
Jake: Sorry, pardon my French.
Colin: [laughs]
Tobias: All of the gambling, you can use that stuff to hedge. I think that even zero-sum stuff is worthwhile if there’s one end of it allows you to hedge an idea that you have or hedge your business or whatever. I do think even the zero-sum gambling has some virtue in it. And I say this to someone who doesn’t gamble.
Colin: Which makes you allowed to say it.
Jake: Yeah.
Tobias: There you go. [laughs]
Jake: Hive mind. Kill, hit him.
Tobias: I’m defending it even though I’m not personally invested in it. What do you think, Colin?
Colin: Yeah. I think about–
Jake: Colin is at the cold face of this. How do you feel?
Colin: No. Actually, what was coming to mind as you were talking about that, is just some of the level of crazy, I think that’s required to create in the world. So, I think about someone like Elon Musk and say what you will about the guy. He is maybe a crazy person, but has created a lot. I am thinking about that on a more personal level. Some of the companies that I’ve bought and some of the founders that have created the businesses that we bought. And I’ll tell you, man, they got announced crazy. You almost have to be able to do that and create something like that and whether through all the shit that you’ve got to go through to build a real business and scale it and everything.
Why the World Needs a Little Bit of Crazy: Entrepreneurs, Elon Musk, and Creation
So, I was taking it as the world needs a little bit of crazy to be able to create and build those sorts of things. And so, I think a lot of people look down upon crazy people in that sense. I’m not using it as literally crazy people.
Jake: Although maybe. There’s a very fine line between genius and insanity, right?
Colin: [laughs] Yes, it is. There’s definitely shades of gray there. So, I don’t know how you’d put guardrails around that, but I think the world needs people like that whether you like them or not, because they build things that wind up becoming important to society down the road. So, yeah.
Tobias: Is Musk the greatest entrepreneurship through acquisition person ever?
Colin: Objectively probably, right? Yeah, just tally. Yeah.
Tobias: Because Tesla, I guess he–
Jake: He found it. Yeah.
Tobias: No, he didn’t.
Colin: He bought it.
Tobias: But he has had himself updated to a founder, which is probably fair. The Tesla that exists today is clearly like–
Jake: it’s a little different than what he probably when he took over.
Tobias: Vastly different from the thing that he took over. Yeah. I guess he started SpaceX though. [crosstalk]
Colin: Yeah. The world gets a little crazy, man. Yeah, just a little bit.
Jake: Sorry, go ahead, TC.
Tobias: I was just going to say, it’s just a throwaway. I like that line, “We don’t do this because it is easy. We did it, because we thought it would be easy.”
[laughter]Colin: Yeah.
Jake: Yeah, that’s exactly.
Tobias: Sorry, JT.
Engineers vs. Lawyers: Why China Builds and America Debates
Jake: I was just going to say, there’s an interesting book that came out recently on comparing China and the US. A lot of it was about the leadership styles. China being primarily run by engineers. The CCP is made up of, I don’t know, whatever 95% of them have engineering degrees, and so they’re really good at building things. They just get things built there. The consequence of that then is that the– There’s KPIs for things. And so, when you boil humanity down to one number, you end up with some very– I don’t want to make moralistic judgments, but short sighted when it comes to human liberties and freedom and happiness get sacrificed often.
And in comparison, the US, has been run by lawyers, like we have– Basically every president has a law degree, and all the Congress is all made up of lawyers. They’re really good at stopping things from getting done. [Colin laughs] And so, that’s what we end up with is a lot of– Well, up until recently, we do a pretty good job of protecting civil liberties, but at the expense of just getting shit built.
Colin: Being practical. Yeah.
Jake: Yeah, yeah. You lose a practicality to it. And so, probably the middle path like always is the correct answer, but it’s interesting to see those two societies.
Colin: You wind up having two types of person at odds with each other, the formulaic data driven people fundamentally don’t like creative and loose cannon type people and vice versa. Yeah, if you’ve got one cohort leading it, then they’re going to want to have all people that are homogenous to them, right?
Jake: Yeah. So, you over index to that, and then you end up with one child policy or zero COVID. There’s some pretty extreme social consequences from that.
Tobias: I forget who said this exactly, but there was a– I think he was an Australian mining engineer by the name of Lang Hancock. He used to say that when he would buy these mining companies and they have an exploration budget which consumes a lot of the money that the mining companies make. And so, he would shut down the exploration. But the moment that you shut down the exploration, you lose all of your blue-sky optionality in the business. And so, the multiples that people would pay for these businesses would sink to basically they were like financial acquisitions at that point.
Colin: Yeah. So, he basically– [crosstalk]
Tobias: He figured it– [crosstalk] Yeah, you figured out that you had to have some blue sky optionality in the guys’ going out and looking for new discoveries which I guess is like a tech company having R&D or that you’ve got to have that wasteful spend at the limit.
The Hidden Value of Exploration: Lessons from Mining, Oil, and Buffett
Colin: I love that train of thought, because this idea crossed my mind a while back. Like you how Buffett got into the insurance business and then used the float to fuel what is now Berkshire? I think about the oil and gas industry, and really similar thought process to mining. If you’ve got these reserves and they have a runoff value to them and most companies tell you, here’s what that runoff value would be, discounted even.
If you could buy that runoff value at 50 cents on the dollar and then control it, shut off the exploration budget, so it’s just runoff cash flows and redirect all those cash flows into something else, who cares about the market multiple? Couldn’t you theoretically control that, buy 50 cents on the dollar and then take that dollar and go redeploy it into other stuff? I don’t know, I guess I have a dream of like, I want to buy a tiny oil and gas business of 50 cents on the dollar, shut off all exploration and then go buy some other stuff with it.
Tobias: But here’s the thing. You could take those earnings and keep on buying all of these other oil wells at 50 cents on the dollar.
Colin: Yeah, yeah. Keep doing more, right? Yeah, absolutely. I’m surprised that I haven’t seen anyone do that yet or take that approach.
Jake: I know one public company that’s done that.
Colin: [unintelligible 00:43:23] is that?
Jake: Yeah.
Colin: Yeah, that’s what I thought. I haven’t seen any math on it, but someone did tell me that they’re trying to take that approach. I think it’s super fascinating. So, if you ever find something in my price range, which is probably juicy, [Jake laughs] let me know.
Jake: Yeah, it’s worked out quite well for him.
Colin: Really?
Jake: Yeah.
Colin: Okay.
Tobias: Specifically buying the oil wells in his– He’s bought one, right? Has he bought more than one?
Jake: More than one.
Tobias: Okay.
Jake: Yeah. A couple different projects. And the idea is really like you JV with someone else to actually do the production-
Colin: They do the work. Yeah.
Jake: -that turns into a royalty that you just basically like need some– [crosstalk]
Colin: Oh, man. Sounds amazing.
Jake: Yeah, it can be. He bought well, too. That’s the key. You have to buy well.
Colin: Yeah, yeah. Know what you’re doing.
Jake: And then, you just wait till you get the price that you want and then you turn that into cash when it’s convenient.
Colin: Yeah. The market will never give you full credit for it. But if you can do it, generate good return and then redeploy it smartly, then it could be really interesting.
Tobias: A couple of good lines here. “Howard Marks says People put “premiums” on possibilities” and “discounts on reality.” That’s good.
Colin: Yes.
Tobias: And then, Austin–
Jake: I’ll just add, he said it well. Hard to believe.
[laughter]Tobias: Yeah. So, Howard Marks has been unusually– not bullish, but not bearish, I would say, recently, which is funny because I think he was more bearish with the market lower and less speculative than he is today. And then, I saw yesterday he sold his remaining like–
Jake: [unintelligible 00:44:58]
Tobias: He shifted the last share of Oaktree at BAM. So, now, you probably get to hear what he really thinks.
Jake: BAM, indeed. [crosstalk] $3 billion in the bank account.
Tobias: And the interesting thing was that BAM had said that they thought that they’d hold that and they were in partnership with these guys, because it was only with a 35% share that they were left with the Oaktree guys. They’ve put it to them maybe right at the top of the market, who knows? Got any view there, JT?
Jake: Yeah, I’m not sure I would want to ever grant Howard an option. I think he would know when to exercise it at a time that was disadvantageous for me, [chuckles] especially when it’s his business he built.
Tobias: What do you think, Colin? You ever do deals like that where you leave the founders with a third share and the option to put it to you?
Colin: Yeah, we have done that a couple of times. We’ve done some seller rollover equity, we’ve done some earnouts, we’ve done some seller note in a couple different situations. I think, at this point, having done this enough times, I feel like I would favor a clean break, especially if it’s something that someone spent 20- or 30-years building, you probably want to set the precedent of their out of the way and you’re running that company from then on, but then they just have expectations that you’ve got to meet in different ways. So, they may care more about what you’re working on, and how things are going and other things, even if they’re only a minority owner.
So, I probably would be more in favor of clean breaks on stuff. But I did just finish the John Malone book, Born to Be Wired. No, the new one that he wrote. Born to Be Wired, I think it’s what it’s called. I was really taken aback by the quantity and frequency of JVs, and minority deals and partnerships that he’s done in building Liberty. I know Liberty has always had lots of minority stuff and investments that weren’t necessarily wholly owned or controlled and cash flowing back to the mothership.
Even back in the 1970s, 1980s, 1990s, he was doing JV type stuff left and right. Partner with people to build this thing, build that thing. So, I don’t know, I don’t have like a firm grip. I got to own 100 of everything I do. Some people feel that way. But yeah, it’d be nice to have a collection of bets and have good partners working with– You bring skills to the table, they bring skills to the table and you can’t share the spoil. Yeah.
Tobias: Yeah, that’s the problem with 100% deal. You got it all, but it’s all down to you. If you got– [crosstalk]
Jake: You got a real bozo at the helm then.
Tobias: Yeah, that’s a problem.
[laughter]Tobias: Austin has a good line here. He’s talking about just on the letting the world run down. So, Oxy is probably close to being in that kind of realm and Buffett certainly had been at pains, like, hold Vicki Hollub to-
Colin: Scoop up the rest of that?
Tobias: -that deal. But then, Kraft Heinz– Do you think Kraft Heinz, is that in runoff?
Colin: I don’t know. Those are big enough brands that I don’t know that those are– I wouldn’t necessarily call them secular decliners. Maybe they’ll struggle with just the ease of starting up a new consumer brand in the food and beverage space. I don’t know that those will ever truly go anywhere. I can’t speak to some of the stuff smaller in their portfolios, but I still view them as Procter & Gamble-esque.
Tobias: They’re a lock when there were limited number of TV stations, limited amount of shelf space, needed to have a brand that cut through, that everybody recognized and then just dominate that space, that mind share. And now, it’s so much more fractured, people can order online and they get their information from social media or whatever it might be.
Colin: Yeah.
Tobias: So, you can start up something that would– It’s not–
Colin: It has changed the nature of the grocery business too. My wife and I, we’ve got small kids, and so we order our groceries online, save the time of going, dealing with that. So, yeah, absolutely it makes it easier to buy different brands, different products and stuff. More of an e-commerce type play.
Tobias: I feel some of those brands, like they’ve hollowed themselves out a little bit by using all of those just terrible ingredients that they’re obviously cheaper and so it increases their profit margin. But it’s so bad for the people who eat them that it’s just left this open field for people who want to come and make them either the way that they used to be made or a slightly healthier way now. I’ve seen so many brands make inroads into just generally.
Jake: All right, California hippie.
[laughter]Tobias: Mate, if they made some of that stuff the way they used to make it, not lard, put the–
Jake: Beef tallow, baby.
Tobias: Yeah, beef tallow– [crosstalk] Give me the beef tallow fries.
Colin: My wife’s litmus test is just what’s the quantity of ingredients on the list. Not necessarily–
Tobias: Yeah.
Colin: Yeah, that doesn’t have to be perfectly clean, but it’s like, “All right, if it’s three paragraphs long, there’s got to be some stuff in here that I shouldn’t be ingesting.”
Tobias: That’s the best heuristic, just the shortest list possible.
Colin: Yes. That’s why I like Häagen-Dazs. I love ice cream. Häagen-Dazs has three ingredients in it, so it’s like, “Okay.” Feel pretty good about eating a whole pint of this.
Jake: [laughs] Is that the takeaway?
Colin: Yeah, that’s the takeaway. [laughs]
Jake: If it’s high enough quality, then you can go as much quantity as you want.
Colin: That’s right. Tradeoffs.
Tobias: Colin, you’re looking for mostly local type deals or you look anywhere? How do you–?
Colin: We’ll look anywhere. We don’t actually own anything that’s local to us. I think we’ve got one employee in Indiana where we’re based. Both my partner and I here are here Indianapolis. We’ve got one person that one of our businesses employed here, soon to be two. So, we’ll look anywhere.
Managing a remote company can be challenging, and so that’s why I think we would still have that same lens of it’s either got to fit within something we already own or it’s got to have an operator or some way to fit into the overall portfolio, which is why I like this idea of finding a $20 million, $50 million, $100 million market cap company that could be a friendly activist play where we can come in, maybe put some capital to work, partner with an operator to help deploy capital, whatever and add some value and things that we’ve learned along the way. That seems interesting to partner with someone in that regard.
Tobias: Yeah, for sure. What’s tax time? Just a nightmare with 15 entities?
Colin: It’s not fun.
Tobias: [crosstalk] outside investors.
Colin: We’ve got outside investors in one company that we own. We did a friends and family round to help get a deal done a couple years ago, and the sellers rolled some equity in that business, too. So, we’ve got like K1s and stuff to deal with there.
Tax is pretty unpleasant, just generally speaking. My partner is always like, “Hey, I’d love to get our taxes done by the 15th this year, April 15th.” And I’m like,0 “Yeah, set your sights to the fall, man. I think it’s going to take a couple months work through this stuff.”
Tobias: I think you can extend it to October 15th, right? It’s tomorrow.
Colin: Yeah. Tomorrow. Yeah, that’s right.
Jake: Oh. Now, you’re telling me.
Colin: We’re done. We’re good. We’re good in that regard.
Jake: Better get started.
Colin: Better get started. Oh no. Yeah.
Tobias: Austin, are you talking about Marks here? He says, “Marks is selling a– He’s selling a ton of brands via 3G. Buying small high margin businesses in developing markets. Buffett, Planter’s, Oscar Mayer, Maxwell House cheese brands in Canada.
Colin: I feel like even though the markets seem expensive on the whole, I’m still finding a decent amount of pretty good ideas in the value space. There’s stuff that still seems pretty recessionary, like trucking, transportation stuff. But I don’t know, I’m still finding a decent amount of reasonably cheap and decent ideas, especially companies that are– Sorry, go ahead.
Tobias: I was just going to say, other than that very top layer of the very, very biggest companies. Who knows, they might be fairly valued if the singularity and that all happens. The other everything else seems to me to be like pretty cheap. There’s a lot of value around. And I agree. Trucking’s bombed out. And trucking’s also got the– With ICE taking a whole lot of foreign drivers off the road, they’re having trouble finding seats. So, a lot of the rates are going up, which is maybe good for trucking, I don’t know, maybe the volumes are going to stay down. I don’t know.
Jake: Is it just a fear of recession? Is that the narrative?
Tobias: I think there’s definitely little earnings. From 2022 to today, smalls are all down. Even S&P 500 earnings are down from 2022 that are up, operating earnings basis.
Colin: It feels like there was that period of super normal earnings post COVID, the demand spike, whatever you want to call it, and it impacted tons of industries differently. And so, that tail was longer, it seemed like in a few industries. But I think we’re still churning through a lot of that stuff. Look at a lot of these building suppliers, like Atkore, ATKR, I don’t know if you’ve looked at that company.
Tobias: Yeah. Yeah, I own– [crosstalk]
Super-Normal Earnings and the Coming Value Opportunities
Colin: $300 stock now it’s down to 60 bucks. So, Stanley Black & Decker, oh my gosh, I just was looking at that the other day– Some of these companies, I feel they’re still just trying to figure out what a normal year looks even here in 2025, 2026. And trucking I think fits into that bucket of super normal earnings. Now, it’s leveling out. They’re trying to figure out, okay, what’s normal really going to be.
Tobias: You can still see the pig going through the python in a lot of those– 2022, all that stimmy– I guess it pulled forward a whole lot of demand and then we’re still working through it even now. I feel like we’re getting closer to trend here, and then maybe there’s a little bit of weakness and maybe some of them are a little bit below trend.
Colin: Yeah. I’ve tried to make this a bucket of companies to look at. I just call it super normal earnings type companies post-COVID situations. I don’t know when the right time to get involved or interested in some of those are, but I feel I want to watch a basket of those types of businesses. Because at some point, those industries will turn and go back to normal, so to speak, and they could be really interesting.
Jake: Are they growers or showers? [chuckles]
Colin: Yeah. Stanley Black & Decker, we’ll go back to this one. [chuckles] They came off of a COVID year of earnings. I think it was, I don’t know, seven or eight bucks of earnings per share. I think it’s for this year, 2025, they were like, “Yeah, earnings are going to be zero. Literally nothing. And then next year, it’ll be back to I don’t know, $5 or $6.” I’m like, “Oh my gosh. Can you imagine?” Being that big company– [crosstalk] Jake: Is that ticket write downs? Is that what—
Colin: Yeah. Well, no, that’s just from their core business. That’s their non-GAAP number.
Jake: Wow.
Colin: I’m like, “Oh my goodness.” So, you just have these companies that are just taking it on the chin from a whole bunch of different things, whether it’s inflation and costs, supply chain, inventory, whatever, just a number of different issues.
Tobias: These problems are easily solved. Stick AI and get those things in Sydney Sweeney’s hands in making it.
Colin: [laughs] Our tools. Yeah.
Tobias: Sorry, JT.
Jake: No, I was just going to say like, if you think of– Let’s call that kind of maybe a potentially prototypical example of maybe what private equity would have bought and levered up. Higher financing costs, maybe weaker business, like where are the bankruptcies? Where are the–
Colin: Totally. Yeah, why haven’t those shown? Because a lot of these companies– The reason that Stanley got in that into that space– I’m looking at another company now called Leggett & Platt, LEG is the ticker. They did the same thing. During COVID, during their super normal earnings period, they levered up to buy another business-
Jake: Of course.
Colin: -experiencing super normal earnings.
[laughter]Colin: [chuckles] So, then they layer on a whole bunch of debt and get hosed as both of those things unwind. Yeah, I’m surprised there haven’t been more bankruptcies. I guess there have been in some industries have been hit more than others. Think about bedding and mattresses, furniture and retail and cons and all those kind of low-income type demographics, those were hit pretty hard.
Tobias: I actually thought you were going to say you’re surprised there weren’t more private equity deals going through. Crocs is an example of something out there that I just think– Crocs is like $4.3 billion market cap at the moment. It’s got $960 million in free cash flow on that market cap. So, that’s pretty good. That’s almost a small private acquisition.
Jake: You can lever that up.
Colin: You can lever that up with someone else’s money. Yes.
Tobias: Sketchers got done at $13 billion. So, clearly, it’s right in the hitting zone for some of these guys. I get like, it’s faddish. It’s a single weird shaped clog that goes in and out of fashion. I don’t know, I feel like there’s a potentially a big wave of private equity deals coming. But then, private equity’s got its own problems trying to digest everything that it’s done over the last 10 years or 20 years.
Colin: Yeah, maybe they’re struggling selling stuff to be able to generate what they need to– I don’t know, they still talk about the dry powder that’s out there. But yeah, I’ve seen a whole bunch of companies with real businesses that maybe the industries were in a downturn, but now they’re pretty stable and they’ve either sold some stuff to get debt under control, they went from 3x or 4x lever to 2x to 3x levered. It’s like, “Okay.” Those are pretty interesting at single digit earnings multiple. Yeah, I’m surprised that you wouldn’t have even smaller private equity firms interested in that.
Tobias: Colin, it’s been really fun. We come up on time. Tell us where folks can follow along with what you’re doing or get in touch if they want to.
Colin: Yeah, my Twitter is a good place to reach out @valuedontlie for any of the Rasheed Wallace fans out there. [Jake chuckles] And my email is colin@circlecitycapitalgroup.com. Happy to field emails too.
Tobias: JT, want to plug Journalytic?
Jake: We do that every week. It’s fine. Let’s get it next week.
Tobias: I’m going to plug my book.
Jake: Yeah.
Tobias: Oh, can’t read it. Can’t see it.
Colin: You got it. Yeah, there you go.
Tobias: Soldier of Fortune. The Kindle version is out on 16th, which is Thursday.
Jake: Is it true that you got Gilbert Gottfried to read the audiobook?
Tobias: [laughs] No, I got the same gentleman who did The Acquirer’s Multiple. He’s NPR in Atlanta. He’s got a great voice.
Jake: He’s Legend.
Tobias: Colin, thanks so much.
Jake: Yeah, it was great, Colin. Thank you.
Colin: Yeah. Thanks, guys. Appreciate you having me.
Tobias: Our pleasure. We’ll see you next week, same bat time, same bat channel.
Jake: Luca.
Tobias: We got Luca.
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