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Life gives you what you deserve, it doesn’t care what you like

For this first post of 2105, I am channeling my nascent inner Ray Dalio. If you’ve never heard of Ray, he runs a hedge fund, Bridgewater Associates, which he started from his apartment in 1975.  He has risen into rarefied air among investors – Bridgewater is, and has been for quite sometime, the largest hedge fund in the world managing in excess of $160 billion.  I believe Dalio is to hedge funds what Warren Buffett is to the public markets.  And for those of us who look to these titans to learn, we sometimes think “Wouldn’t it be great if you could climb inside their head and understand more about how they think?”

Well with Ray, amazingly, you can.  In 2011, Dalio took the bold step of publishing on the Bridgewater website a 123 page document entitled “Principles”.  No, there are no investing tips, but rather the content delves into how he thinks, what he values, and how he has evolved himself and his firm to rise to the top in a very competitive field.  For me, as a student of anything that can enable one firm to compete and succeed over the long-haul, this peek into Ray’s world, and mind, is simply fascinating.  To some, Dalio has evolved to a sort of “cult-like” status, with all the good and bad that entails depending on who you read or listen to.  Having never met Ray (yet!), I don’t really want to wade into any of those tidal pools, but would like to draw a few intersections with what we try to do at Kestrel Capital Group.  The title of this post summarizes one of Ray’s perspectives, and yes, he’s a realist.  In fact, he desires Bridgewater to be a place striving for “hyper-realism”.  With that perspective, if you step back and look objectively at a life, over time, more often than not, one gets what one deserves.  Life doesn’t care what you want, but rather, it more or less delivers you what you deserve.

At KCG, we hold a similar view for companies.  If you sit pat, make no effort to grow, learn, evolve, contemplate your business and its journey – more often than not, your market will give you what you deserve.  And thus we strive to engage with our management team partners to think long and hard about where their business has come from, where it is going, where it could go, what could get in the way and what they could be doing today to carve a new path.  How do they solve problems?  Tackle challenges?  Recruit, train and retain their human capital?  These questions take time, and require thoughtful input from people inside and outside the organisation.  Importantly, in fact in most cases critically, the customers (old, current, new, lost, etc.) can provide the best feedback and barometer to the waters that lie ahead, and how one can compete effectively and win over the long-term.  I don’t think this will be my last post about Ray, and I encourage you to dig a bit into his journey – there is much to learn for organisations who desire to compete and win over the long term.

The Millennials Are Coming…and Culture is King

They used to be called “Generation Y”, but today we know them mainly as Millennials.  This of course is the generation born from (roughly) 1980 through the early 2000s, depending on which definition you choose to follow.  They are a large group – larger than Boomers, much larger than GenX – and growing.  They have often been characterized as a lazy, selfish, technology addicted, unmotivated group.  However, many pundits argue, and I happen to agree, that this generation stands be one of the greatest in American history, and they also stand to change our work lives in some amazing ways.  You may wonder – why does this topic show up in a private equity blog post?  Well, fundamentally, our Kestrel Capital Group approach is different.

We intend to hold our businesses for a long time.  And if we are to be successful, we better be worried about attracting and retaining the best and the brightest team members to our organizations.  And in the future, those individuals will increasingly be Millennials.  They are the most researched generation in history, so there is plenty to read, and plenty of guessing going on as to what they will evolve into.  But one of the consistent themes is that culture in the workplace matters.  It matters more so than in any prior generation.  What does that mean for us?  This generation self identifies, and has acted, to say “well you know what, this culture stinks, my boss is a jerk, and I’m just gonna quit and find another job, even if it pays less…”

They care enough to quit and walk away.  Now folks from my generation and above may say “that’s fine, good riddance…”  but I think that’s a big mistake.  You don’t have to become one, but for us and the business leaders we partner with, we sure better try to understand them – and realize that now more then ever, culture in business matters.  If you’re interested in exploring more – check out this Brookings article called How Millennials Could Upend Wall Street and Corporate America.  And you may also want to get a tattoo, because almost 40% of them have them, and nearly 20% have 2 – 5…trust me – they are different, and they are coming…

How will the legacy of your family business hold up?

Family businesses come in all shapes and sizes, from the corner store to Walmart; widget maker to Ford Motor Company.  Did I mention Walmart and Ford in the same sentence as family business?  Yes, Ford and Walmart are two of the 150+ family controlled companies in the S&P 500!

Among the resources available from The Family Business Institute (a professional service firm dedicated to serving the needs of family and closely-held businesses) is an interesting article on the topic.  As a private investor focused on partnering with privately held, lower-middle market businesses for long-term (think decades not years), there were several interesting points in the Family Business Institute’s article 10 Things You May Not Know About Family Businesses.  Not surprisingly, family businesses are enterprising and tend to be successful . . . but their life span is not indefinite (24 years on average – see #6 in the article).

Why only 24 years?  Reasons vary for sure, but one of them has to do with transitioning a business beyond the leadership of its founder.  There are many effective solutions to this challenge, and at least one sure fire way to fail and that is to fail to consider the issue.

Are you considering what the future holds for the legacy of your family business?  Beginning to think about liquidity?  Do these thoughts resonate with you?  If so, give us a call.  We would love to talk.


Fail Fast…

A famous paraphrasing of a Thomas Edison quote is “I haven’t failed. I’ve just found 10,000 ways that won’t work.”

…to Learn Faster

While I’m no longer an active venture capitalist in the traditional sense, my Partner Bill and I often still find applicability of what are sometimes considered “start-up” or “venture” philosophies to our current investing model as purchasers of established businesses.  “Fail fast” is one such concept.  In the VC world, whether you say “fail fast” or “fail forward” or “fail often”, it pretty much means you can’t learn, grow, evolve or succeed without trying and failing (hopefully as quickly and inexpensively as possible).  I was reminded of this mantra while listening to a recent podcast on Freakonomics Radio called The Upside of Quitting.

It may seem obvious that this is absolutely true for start-ups.  No product/service, no team, no customers?  There’s only one thing to do – get started!  And fail.  And learn.  And keep going.  In our companies, all of which are established businesses with existing products and services, this dictum is just as applicable as it is to a start-up.  And while I prefer “learn fast” or something with a little less negative connotation than “fail” – the idea is the same.  In business, and in life my opinion, you must embrace learning, evolution and change or you absolutely will fail.  And doing so fast (or at least faster than your competition) can often give you an edge as a market changes / evolves.  Whether in functions inside the four walls or out – trying something new and working to improve, you should expect mistakes, and keep working toward getting it right (or at least – getting it better!).  So if you embrace a culture of organizational learning (a topic for another blog post!), in our view, you are already moving in the right direction!

Think Different


Remember that line from the late 1990’s Apple advertising campaign?
Think Different was the slogan for an ad campaign ordered by Steve Jobs shortly after he returned to the Apple experienced massive growth over the nearly 15 years following Jobs’ return in no small part because they did exactly what the slogan suggested.

As we set out to form Kestrel Capital Group, Steve Vivian and I pushed ourselves do to the same – think different. With combined experience of nearly fifty years financing and investing in lower middle market companies, we have learned a great deal along the way. And while we bring many of those lessons with us, Kestrel Capital Group also departs from the traditional Private Equity model in a few key ways. We are focused on the long-term . . . the really long-term. We go into our investments with an indefinite hold period rather than the intent to sell in five year. We have a preference for being involved with companies for a period of time measured in decades rather than years. And we bring the support of investors who share this long-term mind set.

From this key difference, several other nuances in approach naturally follow. We invite you to browse our website to learn more . . . and to give us a call if our approach resonates for you, or someone you know who may be considering a transaction.