The Recap

This week’s recap features the time I met billionaire Brad Jacobs as well as a DM question I get regularly. Be sure to follow PEoperator on X.

---

Follower Question: I'm toying with the idea that we only change the corporate/back office functions in year 1 (accounting, legal, rebadging employees, digital/revenue funnel, etc). Then majority of the onsite changes hit in the off season before year 2 (upgrading systems, implement capex, etc). Is this a dumb idea?

I don't think so at all... I've done a lot of integration work and I find that initially people are a bit shell-shocked and trying to find their footing. If you are changing back end, benefits, payroll and other things that impact the employees, sometimes it's best to wait. I have had a lot of success staging the back office first like you suggest and then moving into the actual business next. When I do move into changes to the business, I try to identify the low/no cost methods for improving the bottom line (e.g. consolidated purchasing) before messing with their actual processes. By that time, you've often built some rapport and trust with the team. Plus, when you first buy, you don't always know what you have on your hands. Waiting a bit allows you to make a better evaluation of what changes are needed. So I totally agree with your idea. Couple things to consider: 1) change fatigue - you don't want the changes to drag on forever, that tires employees and 2) your exit timing - if planning to exit next year, for instance, might want/need to move faster.

---

This is my best performing post of all time, by a longshot.

I got a lot of questions and DMs about it. My point is, if you want to have an impact and a chance at major success, you have to do more than analysis. You have to execute.

I began my career as an analyst but only encountered meaningful success when I took charge of execution and leading people

---

I read this book last week - John Malone, the “Cable Cowboy” is my favorite operator and this memoir does not disappoint. Interestingly, I was introduced to his career by the billionaire mentioned in the next post - he knew John Malone personally (no, the John below is not John Malone).

---

Click here for the original post

I used to work for a couple billionaires. They ran a firm that mostly invested in public companies, but occasionally would buy a private.

I worked at one of their private companies along the way - the only one at the time.

One of the billionaires, we'll call him John, taught me an important, counter-intuitive lesson.

A big part of my job was capital allocation. I didn't make the final decision, but I vetted projects and made recommendations- capex, new locations, M&A, etc. I also led the execution.

We had normal board meetings quarterly and then annual meetings where we went a little deeper.

John didn't attend the board meetings, but he did attend the annual meetings, so there was always a little added pressure.

I should say, John was one of the nicest, most generous people I've ever met. He was gracious, kind, and never raised his voice.

So heading into one annual meeting, I was particularly proud because I had found some very high ROI projects. I mean, >1,000% and multiple >100% IRRs.

I was excited to showcase all the hard work we had put in to identify and vet these projects to get them ready for approval.

We get on the call and eventually my turn to present rolls around. I walk through a summary slide with all the projects listed and their corresponding IRRs.

Even as I'm talking, I'm braced for praise. This is a group of investors - they are going to love this.

When I get done, crickets. No praise, no excitement.

Then John pipes up...

"These look great, but do you have any more projects?"

More projects? Are you kidding? Look at the numbers. What planet is he on?

I responded, "well we definitely have a lean team and this is what we've been able to get to so far but yes, there are definitely more out there."

Then it was John's turn to explain...

"This level of return is great, but what it indicates is that we aren't looking at enough projects. Interest rates are at ~5%. I would love to see a longer list all the way down to the 20% IRR projects."

After he said that, it seemed so obvious. These returns were great (w/ meaty $) but if these numbers are real, there must be dozens or hundreds more opportunities throughout the company that still generate an acceptable return.

His point was that we need more projects to generate more dollars. IRR is great but ya can't eat it. Go find more.

John was nice, even complimentary, but his point was right.

I think about that experience a lot and actually formed a practical rule that I now use at my companies:

"If we aren't rejecting projects, we aren't looking hard enough."