What Private Equity Thinks About Property Management with Brent Beshore

What did Larry Bird do? Larry Bird put out a note to call it 15, 20 of the top agents in the business. And he said two questions, why do you think that you should be my agent? The second question was really what he wanted to ask them, which was, if I didn't pick you, who should I pick? And almost unanimously everyone said, well, of course you should choose me, but if you're not going to choose me, you should choose this guy. And that's who he ended up picking. It works the exact same way with vendors. So all I would do is I would get the best marketing vendors you could say, and I would ask them that question. I would say, why Why do you think it should be you? And if it's not you, who should we pick and why? That's going to be your map.

Welcome to Season 4 of Peter Lohmann's Podcast. This podcast is a show about all things residential property management, from property operations to sales and marketing to growing and managing your team. I'm your host, Peter Lohmann, co-founder of RL Property Management. For season 4, I have an exciting new guest each week. We go deep into conversation about problems facing professional property managers and the best ways to overcome them. Thanks for listening. Now let's go.

Welcome back to Peter Lohmann's podcast. I'm so excited today to introduce Brent Beshore with Permanent Equity. Been a longtime follower, Brent, and I'm thrilled to have you on the show today. For those in my audience who may not be familiar, if you wouldn't mind, I'd love to have you give just like a 90-second background, kind of who you are, what you've been up to, and then we're going to get into it. Yeah.

Well, thanks so much, Peter, for having me on. Yeah, I'm Brent. I grew up in Missouri. I live in Missouri. I went to school on the East Coast and then came back to get my law degree, my MBA, and met a girl, called her the sexy scientist for a year before I asked her out. And we have 4 kids, 3 girls, and then we have a newborn son now. I run a firm called Permanent Equity, which buys small to medium-sized businesses around the country. So we have 15 operating companies from coast to coast. And what makes us a little bit unusual or slash very unusual is that we buy them typically with no debt. We take a very long-term approach to it. So we buy with no intention of selling the business. There's a lot of nuance under each one of those, but yeah, love the team. We've got, we're located in Columbia, Missouri. And put on a couple events a year. One's called Capital Camp, one called Main Street Summit, trying to build community, which is something that we think is really important for doing life well. And excited to be here.

So we're definitely going to get into permanent equity. I got a lot of questions and there's a lot of fun stuff to talk about there. Where I want to start though is with one of my favorite quotes from you, which I know is going to resonate with my audience. And that is, all businesses are loosely functioning disasters. And that has proven to be so true for, at least for me with my small business and in talking with a lot of other property management business owners, I know that a lot of them feel that same way. So where did that insight originate and what, what's your takeaway from, from that quote, I guess?

Yeah, well, so the, I think the full quote is, All businesses are loosely functioning disasters and some happen to make money, right? Which is that, that second part's important, right? Because if they were all just disasters and none of them made money, we wouldn't have any businesses. But anybody who has operated a business, so I come from an operating background. I'm not an investor. In fact, I don't even think of myself as an investor today. Yes, we manage hundreds of millions of dollars of outside investment. We've got incredible investors on team. I don't consider myself an investor because my experience has been in getting my hands dirty, is in operating businesses. So I was an entrepreneur before I started acquiring businesses. And even the early days of acquiring, I mean, I got my hands pretty dirty in these companies and I loved it. I love working with people. I love working in these systems that were created and figuring out what should stay and what should not and just how do we improve the lives of the people who we're getting to work with. So where did the quote come from? It came from experience. I've literally never been a part of any organization that I would say is well-functioning. Now, it all depends on your definition, right? Like, I don't want to give the impression that we, that we, you know, the companies that we own or the companies we get involved in are not great companies. I mean, we love them. They do quite well. We've generated really great returns over time. But all these companies are constantly fighting battles. I mean, I, you know, I've joked that it's kind of like a knife fight where you get out of bed in the morning and you try not to get stabbed, and then you get back into bed and do it all over again. In the startup world, it's been equated to eating glass, right? Getting used to the taste of your own blood. Anybody who's been in the operating world knows, I mean, it is tough, right? I mean, I was talking with a friend of mine who's a business owner the other day and he said, "Man, I have a laundry list of things that I want to get accomplished and I just had our phone system go out. We can't even get internet consistently at our office. We had the warehouse manager is, we found out is on pretty hard drugs." and we had to get him into rehab, right? There's all these things that are constantly happening. Like, that's like one week. Like, that's just a snapshot of one week. Look, people are messy. I'm messy. You're messy. When you get a whole bunch of messy people together and try to accomplish something, it's gonna be messy. And so I think that quote just comes from the perspective of acknowledging it's gonna be messy, and that's okay. That's life. Like, life is going to be messy. Like, we so often seek comfort when it's actually discomfort and challenge that helps us grow. And so, if we all just acknowledge we're going to have really hard stuff we have to deal with, there are thistles and thorns in this life. There's just no way around it. You can't avoid them. You got to walk through them and you're going to get a little bloodied and it'll be okay. Keep your head up, keep going. It'll be fine. But we all got to acknowledge what reality is. And so, it shouldn't shock us when we're operating a business, we're in an operating seat, Things are really messy. From an investor perspective, it shouldn't surprise you that when you invest in something, that things are messy. I think that's most often where I see the biggest disconnect or the biggest challenge with people who I work with is sometimes they get in this mindset of like, "Hey, we're going to buy this thing. It's going to be hands-off. We're going to let leadership kind of do their thing." They get abstracted out of the messiness. That doesn't mean the messiness isn't there. It just means you don't know about it. So it's better to just be aware of what is the messiness, acknowledge reality for what it really is, and then work through it.

I love that you talk about this because you've seen a lot of businesses, and I think that's, that's actually underselling the case. You've seen an unbelievable number of businesses. You've worked in a lot of businesses. You own many businesses. And so it's one, it's one thing for your buddy to say, oh yeah, my business is kind of messed up too. But coming from you, it's like, okay, this guy has seen inside a lot of different companies, many of which are wildly successful and profitable, and still believes this. And it, to me, it feels good. It validates a little bit of my intuition, which is that you can never solve all the problems in a small business. It's trying to— it's like trying to push back the ocean. It's just impossible. And I know from talking to a lot of my peers, that they feel badly about this. They feel guilty. They feel like they're not working hard enough. They feel like they're not smart enough because they know all the problems. They know all the different areas in their business. I should do this. This shouldn't be like this. I really need to work on this. Something I've tried to really internalize for myself is that one of the skills you develop as you grow as an entrepreneur is Understanding what fires to let burn, because you can't put them all out. You gotta, you gotta acknowledge that, yeah, that's messed up, you're right, it's gonna stay that way too because the next 2 quarters we're laser focused on this. So I think maybe one question for you before we move on is like, given that, how do you know— I know this is a really general question, but how do you know what are the, the disasters that you do need to focus on and fix versus the fires that you can let burn?

Yeah, I always think about through the lens of probability and magnitude. So if you look, there are things that are smoldering that have a very high potential magnitude but very low probability. Those are still things you probably need to take care of, right? Because they can still burn your house down. But even though the odds are low, you don't want to take that risk. If there's something that has low probability and low magnitude behind it, and I think this works, by the way, both directions. So we're only talking about downside right now. I think this works on the upside too. Where should you focus your time? You should focus your time on minimizing high probability, high downside, high magnitude downside, and focus your energy on achieving high probability, high magnitude upside projects. So it's almost like you want to have a 2x2 matrix of magnitude and probability, and anything that's edging up towards the top right, you go after. Everything that is bottom left, you just let be, or you hire people to manage it and you just trust them. I mean, that's the thing. I mean, the only way to scale, we've all got the same amount of time. The only way to scale is by working with people. And by the way, people are messy.

Love that. Thank you. So let's dive into Permanent Equity. I went back and actually listened to the earliest podcast episode I could find with you in prepping for today, and I believe that was your appearance on, in 2016, on Invest Like the Best, uh, with Patrick, uh, Patrick O'Shaughnessy, right? It was fascinating to go back and listen to that. First of all, I didn't realize this, but your firm had a different name back then. It was called AdVentures. And when did you rebrand that, by the way?

Let's see, I think it was been 3 or 4 years now. Maybe it was the beginning of COVID I think we rebranded, or maybe it was right before COVID I can't remember. Right around COVID.

And at the time you had no outside capital. So, and, and, and I'm really interested to hear how the journey went from, hey, I'm Brent Beshore, I'm with AdVentures, I buy boring businesses with my own money. To, yeah, we've raised a couple funds when we're operating at a much bigger scale. We've rebranded. Like, what changed that, that made you decide, okay, it is time to bring in some outside capital and sort of what has come out of that? Was, was that an— I mean, that's, I guess what I'm asking is, was that a net positive change? I'm assuming yes, but I'm curious to hear a little bit about that.

Yeah, well, what's changed is we have more money. Which is nice sometimes. We owe people money back with a return, which is the downside of having more money. Yeah, I mean, to take you back to 2015, 2016 with that interview with Patrick, so the history of the firm is I dropped out of law and MBA and started a business and actually started kind of a few businesses. And some of them went decent, I would say, not great, but decent. And then I had an opportunity to buy a business kind of out of left field and used an SBA loan, asked my newly married wife to sign a personal guarantee. She's a scientist. She was like, what's that? I was like, ah, don't worry about it. It'll be fine. Sign here. Yeah, exactly. Just sign on the dotted line. And so that went well. And we kind of got together as a group and said, okay. And when I say group, it was all the people who were operating these different businesses. Okay, what do we want to do? Is this something we want to go after? And I think the answer is yes. We think this is an opportunity for us to get good at helping families transition. So started stockpiling cash, had a very low personal burn rate. I was in my 20s, didn't have kids, lived in Columbia, Missouri, super cheap. And so started stockpiling cash and reinvesting that cash. And so bought a number of other businesses, started another business successfully with that, but kind of for a while there had this dual starting buying thing going on until we really determined that acquiring was better for us. We needed to focus on one or the other. And while I enjoyed starting stuff, I mean, I'm a founder, I'm a builder, I'm very entrepreneurial. I'm not an investor guy, right? So that's the big difference. But I knew that this was an area where I could scratch that entrepreneurial itch in a way that felt very sustainable long-term. And so basically started telling people about what we were doing, how we were doing it. We had a very different model. It was first principles based. It was not based on traditional private equity because I had no exposure to traditional private equity. I mean, literally when I say I had no exposure, that first deal I did where I acquired the business with the SBA loan, I called up a buddy of mine who was in finance from undergrad and I said, "Hey, I just bought this business." He goes, "Oh, you did a private equity deal." I literally Googled private equity. Did not know that there was a whole industry out there of people that bought businesses. I've joked in the past that I'm the Forrest Gump of private equity, and people think that's just like the aw shucks Omaha type thing. It's actually not. Then people really hear the story and they're like, "Oh God, you really are the Forrest Gump of private equity." And I'm okay with that. Look, God's got a plan for my life and I'm along for the ride. I'm just trying to be faithful, be a steward of the resources that I'm given, And if more comes, then I'll try to be a good steward of that. And if less comes, then that's fine. And so yeah, got to the point where met this guy Patrick O'Shaughnessy. He came and we hung out in Missouri for a day. At the end of it, he said, "Hey, I want my family to invest in what you're doing." I'm like, "Well, sorry, man. I've already kind of gone down that path with a few other groups. They told me to start a holdco. I don't want to do that for these reasons. They told me to start a 2 and 20." traditional fund structure. I said, "No, I don't want to do that either for a variety of reasons." And I thought that was kind of it. I thought he was going to be like, "Oh, okay. Well, good try and we can just be friends." And he asked me the question that no one else had ever asked me. And man, this is the question that if you ever really want to be in partnership with somebody, this is the question you got to ask them. He asked me, he said, "What would it take for you to take our money? You tell me. You set the terms." "And then I'll tell you if we can do it or not." And I said, "Hmm, that sounds pretty reasonable. Okay. I'll work up something." And so it was probably 3 or 4 days later, I sent something to him and he was like, "Look, tweak this, tweak that. I think we're in business." And I was like, "Well, okay. What do we do now?" And he's like, "Well, we know a bunch of rich people." And I was like, "Well, that's good." And he was like, yeah, we'll help you raise the money. And I was like, even better. And so he and his father Jim, I just can't— I can't speak more highly of the O'Shaughnessys. Like, the people who know Patrick through his podcast, like, he can come off as, you know, he's hanging with the top crowd, like he's hanging with the true movers in this world, right? And we talk like 4 days a week. I love him so much. He's one of my best friends. He is a kind, generous, gentle soul who just gets bombarded. So he has to have some protection around him, but he and his father both, they were just wonderful. They certainly improved my life and changed my life dramatically. And so we ended up raising $50 million in 2017 and then raised $300 million in 2019, and we're investing that fund today.

So this, this is a fund structure, which if you're listening and you're not familiar with the world of permanent equity or like how these, some big real estate funds operate this way too. Like instead of raising money for a specific deal to buy a specific company, you raise money ahead of time. You go to a bunch of rich people and you're like, give me your money. I'm going to hold it for a while, or it's going to be in escrow or whatever. And then when I find a business I want to buy, you're basically pre-agreeing to commit the money, I'm going to use it, we're going to buy this company, and then we're going to own it. And where the way you guys are different than traditional private equity, you mentioned this, is like you hold essentially forever. I know it's not actually— is it actually forever or there's like 20 years or something?

Yeah, we have a 30-year initial term of capital. Yeah, so it's 30 years. So it's practically— I mean, if you want to change our name to semi-permanent equity or the Diet Coke of permanent equity, or, you know, what we're almost permanent equity. For all intents and purposes, when you buy something and you don't have to sell it for 30 years, and also by the way, we have options to renew after it during that time period. So like there's, it's functionally indefinite capital and we really love that because we never want to be a forced buyer or a forced seller, right? So that's the whole idea behind it is let the winners win, let the winners run, and we're all going to do well unless it, so we don't have to sell something that we really like.

Okay. So I love this and, and This of course fits in really nicely with kind of the Berkshire Hathaway, like we buy great businesses and we hold them forever. So I know that as a Berkshire fan shareholder myself, been out to Omaha a few times, like this tends to attract very like-minded individuals. And I would guess that a lot of your investors in your fund are along kind of from that same lineage or way of thinking about capital. Traditionally in private equity, of course, the big payday comes on like sale, right? Private equity holds like 3 to 5 years, then they flip it to a bigger private equity firm, or maybe they IPO and sell to a bunch of retail investors or whatever. But you guys aren't doing that. And so your, your, your investors are relying on either just the warm and fuzzies they get with the intrinsic value of their portfolio going up over time. But then maybe also dividends. So do you have like a lot of dividends that are getting distributed annually or quarterly or whatever it is?

Yeah, we do. The thing— so the way we think about this is that we— the first thing we want to do is look for especially pre-tax but high probability, high return reinvestments that we can make. That's the best for everyone, right? If we could find something that, you know, you and I are partners and we say Okay, we can invest a dollar today and we're going to get a 40% cash return every year moving forward. I think you and I both would say, well, that'd be pretty dumb, especially if it's pre-tax, for us not to do that. That seems like a good way to do things. Conversely, if you and I were running a business together and I said, hey Peter, my ego really needs us to grow, and so I want to take the money that we have and I want to reinvest it, the return on it's going to be almost nothing, In fact, maybe we lose money on it, but man, I tell you what, this thing's going to grow and we're going to feel good about ourselves. You'd be like, no, let's not do that, please, right? Because I have higher opportunity costs. So what we try to do is we set a high bar for reinvestment back in the portfolio where we know we can take that cash and we can use it for something productive, but we encourage the companies that they find high probability, high magnitude returns. Of course, that's exactly something we want to do. So to me, the The way that we're structured perfectly aligns our operating businesses with us, with our investors, where everyone's aligned to say, "Look, if there's a reason that we can find to reinvest, we think it's a great use of funds, the insane thing to do would be not to do that." And conversely, if there's not a good thing to do with the capital, the insane thing to do would be to keep it. So we invest when we should invest and we distribute out when we should distribute out.

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The concept of, of reinvesting earnings is— that's like true compounding, right? You take, you take cash that a business is throwing off or whatever asset, and you then reinvest it back into the business and then it becomes part of the future cash generating machine. Like the money that you reinvest itself then generates more cash. The reason I'm like really interested in this topic and the reason is because I have kind of one foot in the real estate world and one foot in the small business world. The real estate world is interesting because there really is no compounding or reinvestment in a particular real estate deal or piece of property. In other words, if I go out and buy a 100-unit apartment building, let's say I spend $100 million on it and it throws off, I don't know, $5 million in cash every year. I can't take that $5 million, plow it back into the property, and now have a $105 million asset generating the same level of returns. It's not really possible outside of like a niche or kind of one-off like improvement you could make to the property. So when I buy a piece of real estate, it throws off cash and now all of a sudden it's my problem to, to find something to do with that cash almost immediately. Like as soon as you buy it, it's spitting off cash and now you have this stream of cash that you need to find something to do with. Something to go, something productive to go do with it. What I love about great small businesses is that they can compound. You can take the cash flows that the business is generating, reinvest them back in the business, the business grows, and now the asset itself is larger and producing more cash. That's what I think of as like the true definition of compounding. And it's one of the reasons that I love small business over real estate in a lot of situations. So when you're looking at a small business or you guys buy like, I think what you call like lower middle market or like whatever that phrase is, the private equity guys know. Are you looking for businesses that you can reinvest and compound with, or are you, are you happy to find a cash flowy business that may never grow very much, but it's throwing off enough cash that you can then reinvest that money into either a different business or a different opportunity?

I would say certainly the thing that would be the best is to have a high cash flow business that has lots of opportunities to reinvest in it. Like, that's the pinnacle. Now, the reality is that usually there's businesses that have those attributes that you have quite a bit of reinvestment you have to do just to stay in place. So usually if there's places to put the money to grow it, you have to put some money back into it to keep it. And so the dynamics are there's very few businesses that are— I think the term in the investing world would be asset-like compounders, right? These are businesses that require very little capital to stay on their current trajectory, but you can adjust the trajectory upwards by reinvesting back into them. I mean, that's the holy grail. That's incredible. I would say those are exceedingly rare. So usually when you look at a business and you say, okay, you know, we have a business that we can plow money back into it, call it a 35-ish percent return, relatively unlimited. So we can, we can, we can roll that money forward every year at about a 35% rate. But that, that, that business requires us to keep cash in that business because we have to replenish its supply. So it's kind of like the double-edged sword. So what I would say is I love businesses that are asset light that you can grow without any capital. An example of this, we own a pool business. So the swimming pool business, we're not using very much capital relative to the— So let's say the capital expenditures on an annual basis are maybe 5%, maybe less than 5% of the free cash flow of the business. And there's just really not places for us to put more capital and the business can grow independently of that just by the nature of how asset light it is. That's fantastic. So then we can take that, we can keep the business growing, so everyone's winning at the business, but we can also take those cash flows out and use them for other acquisitions or to do whatever we can. I think that the idea is having a high opportunity cost and knowing what your opportunity cost is across the entire portfolio is really the key. So wherever you have the highest opportunity cost, you want to put the capital. And the most capital, and then you sort of want to fill that bucket as much as you can, and then you want to go to the next project and the next project and the next project down the list. That's the most effective use of capital. There are very few businesses though that are like the perfect business, and you're going to pay up considerably usually to acquire one of them. And I would say the opposite is also true, which is you got to be really careful about really thirsty businesses, businesses that make, let's say they're making $10 million a year, and then you ask the owners, what was distributions average the last 5 years? And they're like, Oh, I think we took out like $1.5 million. We're like, where did the cash go? And they're like, well, it takes a lot to grow this thing. And it's like, well, it didn't look like you grew that much. And it looks like between accounts receivable and capital expenditures, and it looks like the company gobbles up almost all the free cash flow. So would you call that a high free cash flow business? Would you call that a business that makes $10 million or $2 million a year? That's the question we often get into with some of these businesses is we look at, the dynamics and what we want to see is the owner has high discretion over the cash flow and then perhaps is choosing to reinvest it back into the business. But oftentimes you see a business that doesn't have that discretion.

Yeah. And when I think about property management, it's definitely asset light. There's no doubt about that. There's very little required spending every year at a property management business. You're paying a few SaaS vendors and your team, and that's really about it. You may have an office. So property management businesses, when they're set up right, are very cash flow heavy. And what I'm really interested in is when I think about property management business owners and what they do with that cash, I think some business owners, of course, like take all of the distribution and just use it to fund their personal lifestyle. And that's fine, right? That's a personal decision. And then I see other business owners who they kind of like leave it all in the business and they look for ways to spend it to like, quote, save on taxes, right? And they spend a bunch of money on marketing over here, and they spend money on a vehicle over here, and they're doing different things. And I would love for my peers in the industry to gain some insight from this discussion on a micro level and think about, at the end of the year, take all the money out of the business, right? All the dividends, and put it in your personal bank account, not to spend, but to put on your capital allocator hat and now think, okay, I have, say, I have $500K sitting in a bank account, my personal account. I need to figure out what to do with it. Maybe you reinvest it in the business, but you should, you should run some numbers to figure out, like you were saying, Brent, what's my ROI on that? If I invest $50K in marketing in Q1, what realistically is that going to do for my business? Or maybe you have an opportunity as a property manager to buy a piece of real estate and invest it that way. Or maybe your buddy's starting a company and you can invest it there. Or maybe you want to invest in public equities. It, you know, I, I love talking with folks like yourself who have built these huge companies and they have all these opportunities to allocate capital and it all sounds very exciting, but I also encourage folks like you can do that on an individual level too. Anyone who owns a business is essentially a capital allocator, even if they don't think about it that way.

Yeah. And I would say is everyone should use some index as a minimum. For their opportunity cost. So, you know, everyone could— any business owner could take the profits, proceeds, pay taxes on them. I mean, you real estate people, you hate taxes so much. But I— but I— look, like, paying taxes is great because that means you got paid, right? So take the— pay your taxes, take the capital out, and go stick it in like S&P 500 index fund or whatever. I mean, this isn't financial advice, but like, go stick it somewhere where you know On average, you're probably going to get 8 to 12% return by doing nothing. So at a minimum, that should be your bogey that you're trying to hit is if I can go stick it completely passive in some index fund and get, again, historically 8 to 12, 8 to 13%, probably even on the higher end of that blended, that's a pretty good opportunity cost to go and take a look then and say, okay, do I think I can generate a higher return with that by levering my time against my money in my business? If not, okay, well, are there other things I want to do with it? Do I want to, I don't know, invest in a friend's business or do, you know, do whatever, whatever you have access to. Those are then setting your opportunity cost. But I feel like most people don't do that. As you say, they get this, all this money and they keep it in the business. I call it the bladder problem, right? Which is the more money you have, the more likely you are to piss it away. And it's a real thing. It's a real thing, right? I mean, you look at that balance sheet and you say, well, we've got $4 million sitting on the balance sheet. Surely we need to be able to do something with that. No, no, for God's sakes, that's the wrong way to look at it.

Yeah. And what I find fascinating is that different businesses, the way I think of this is they want to be different sizes. Some businesses want to be million-dollar businesses. Some businesses want to be $10 million businesses. And if you try and force a business to be a size that doesn't want to be, your ROI drops to zero. Like you plow money in, you plow money in, plow money in, and it just keeps settling back down to the same size it was. And I'm sure you've run into this where like you have all these different companies, some of them are very reinvestment friendly where you reinvest, they grow, you reinvest, they grow. Others, it's like you try this, you try that, and they always kind of like sink back down to like their, like the size that they just want to be. Is this a dynamic that you've observed?

Oh, absolutely. Yeah. I mean, you can grow pretty much anything by taking money and murdering it, right? I mean, for sure. I think that's the key is that ultimately, if your goal is high return on invested capital, which is what you should do, then you really can't go wrong no matter what you're doing. Either you're wrong about the assumptions you made, great, that's tuition. Learn from it, or you're right and you generate a great return. But either way, again, having that opportunity cost is really the key. I don't know how you'd make decisions in a vacuum. If somebody says to me, "Hey, should I invest in this or that?" I mean, you can imagine I get investment questions all the time from friends, from family, from people even I don't know. And they ask me, "Well, should I invest in this or should I invest in that?" And my answer is always, "I have no idea because I don't understand your opportunity costs." Now, I can ask them, What are your opportunity costs? Most people say, "I have no idea." And I say, "Okay, well, let's try to set your opportunity costs. Do you have the money currently sitting in a bank account?" "Yes." "What is the amount of money that you're currently getting in interest off that?" "X." "Okay, well, right there, that's your minimum opportunity cost. Now, do you think you could stick it somewhere else and generate a higher return?" They're like, "Yes." "Okay, great. Tell me about that." So it's just wherever you think you can stick it with a high probability, and whatever that return is, that's what it is, right?

Yeah. And of course, the other side of this coin is the risk. Every opportunity has a risk factor, and your risk-free, like the base rate, is like T-bills or whatever. It's like 4.5% or whatever it is right now. And then index funds is, on a long enough time horizon, very, very, very low risk, right? Almost as low as I would argue as, as like T-bills if you're looking at like a 20 or 30-year time horizon. And then it starts to get more interesting, right? Well, you could invest in individual equities, higher risk, but no work, like literally zero effort on your part. You're clicking a button. Your buddy's business, much higher risk, a little bit more work. Your own business, like you're constantly trying to think about like what's the weighted— like if it— how do I assign weight to the various risks? To try and figure out how to allocate this money. And I'm sure this is something you're doing all day, every day.

Yeah, I mean, this is— I mean, this is literally— this is the whole ball game. So what we're trying to do at the end of the day is have the highest opportunity cost in the world. That's what I want. I want to have access to the very best investments in possibly in the world, and then I got to make trade-offs between them. Like, if my trade-offs are between good and excellent, we'll be fine. If my trade-offs are between mediocre and bad, doesn't matter what I invest in, it's not going to go well.

Yeah, that's an interesting way to phrase that. You want to have the highest opportunity cost in the world. So like another way to say that would be you want to be at the point where someone could bring you like a guaranteed 20% return and that still wouldn't be good enough.

Like I've had this happen all the time. I mean, we literally at Permanent Equity turned down very high probability 20% returns because they're too low.

I love this. So let's, let's make it a little personal maybe for the audience. And I'm very curious to ask you this. Have you ever looked at a residential property management company to buy?

Yes.

All right. Love to hear about that as much as you're able to share.

Yeah, I mean, I'm happy to share, share anything. I mean, it's a, it's an asset light business. It's highly competitive in my opinion. There are a lot of flavors of property management.. So it's not a monolith. There's not one style of property management. So you've got association management that you could kind of put into this bucket. Are you managing a hotel? Are you managing a set of sort of low-income, moderate-income, high-income apartments? How big is the units? There's all these different flavors. Are you managing commercial real estate? Are you managing agricultural real estate? So there's all these different flavors of the same thing. But at the end of the day, somebody's hiring you to generate returns on their behalf. The owners are hiring you on their behalf to generate returns and deal with all the messiness. And so yeah, they're asset light. They typically generate really good cash flow. The relationships, depending on the sector and the flavor of property manager, are fairly sticky. You know, it's not like you're going to have a mass exodus short of something terrible coming out in the news about you or something that's some catastrophe. Pretty sticky, sticky business. So that's good. It's not quite recurring revenue business model, but it's pretty, it's in that same ballpark. I would say pricing for property management companies are on the higher end of typically what we feel like are comfortable. I think it's a fairly mature industry, meaning there's not a lot of unusual price discovery going on in that. I mean, there are some obviously distressed situations and for sellers and things like that. But for the most part, you can sell a property management company to somebody else. There's a lot of buyers for property management. So from an entrepreneurial perspective, I think property management is a fantastic thing to build. It's of course a slower build. It's going to be more difficult because of the high level of competition. But yeah, we've definitely looked at a lot of them and they have a lot of great dynamics. And I think the issue that we've run into in the past is one, the valuation compared to the expectations for growth. And so I always say if a dentist or a doctor can compete with us to buy an asset, we're probably going to pay too high of a price to get it. So we want to buy things that are unusual enough where we have expertise, where not everyone can just come in and bid on it. And there's not a lot of property management firms that I feel like that somebody else can't, with reasonable effort, buy. They're fairly straightforward businesses. There's not a lot of hidden risks or hidden rewards. It's a down-the-middle business. And so I think most of the time that I've seen large returns generated are typically in roll-up structures, which come with their own difficulties and struggles for everyone. But if you're going to go after it as a private equity firm, I feel like you've got to kind of have some unusual piece of either software or some unusual expertise, or you got to be in a niche that you're trying to scale nationally, internationally. We're not typically used to desiring to just buy sort of a run-of-the-mill— maybe it's a very successful property management firm, it's generating $5, $10 million of free cash flow, it's in a major metro. Those are the types of things we've seen, and we're just like, hey, what is the thing that we can bring to the table here, and at what price compared to the growth trajectory do we think? And we just can't ever get that to kind of click together.

Yeah, that, that all tracks. And the last major investment that's coming to mind here, Thomas Ince picked up Northpoint Asset Management for, you know, with his firm LP First Capital. That was a, that was a big deal in our world. Most property management companies are nowhere near big enough to meet your, I believe your minimum's like $5 million. I think you used to call owner earnings or—

Yeah, we try to be around, around $5 million. Maybe we'll dip down to $3, $3.5 million of owner earnings, but yeah, true free cash flow. Above and beyond reinvestment.

And 98% of residential, of residential property management companies anyway, I think are well under that. So you're looking at, you know, 2,000+ units, I think, under management to be even close to that criteria. So, but I loved hearing your assessment as sort of an objective outsider to our world of how you look at this business relative to the whole landscape of the lower middle market or of, of micro private equity opportunities. That, that was pretty much what I was expecting, but it was really interesting to hear that. So it sounds like this is something you keep an eye on. If a really interesting deal came across your desk, it's not an immediate no. You look into it. Is there an edge? Is there something unique here? Is there a distress situation?

Is this, or you guys don't do distressed deals, but yeah, I would say the, the biggest thing is if somebody came to us and said, okay, look, I own a, a property management business, I've worked on systems, I've worked on everything, I've got this edge that I want to go and use and really blow out and I'm looking for a good long-term partner, that's probably where we'd get kind of serious about looking at it. I don't have anybody like that in my back pocket, and so we typically focus, if we're going to develop a thesis on something, it's typically people first. So it's a people-first thesis where somebody who we really know, trust, we got to get over a decent period of time, either comes highly recommended from somebody, says, hey, we should partner up and go do this thing, that's where we might get excited about it.

What's going on, guys?

I'm really excited because today I get to tell you about one of my favorite vendors in our industry, and that's PropertyMeld. We've been using PropertyMeld at my property management company for the last 2 years to streamline and coordinate all of our maintenance requests. That's what PropertyMeld is really built to do is to make the whole maintenance function at your property management business way easier. Because they have a direct integration with all the major property management accounting softwares like Buildium and AppFolio, it makes it so easy for your maintenance coordinator and everyone else at your company who's involved with the maintenance process to process the incoming maintenance requests, get them distributed to the correct vendors, and then PropertyMed puts the vendor in direct communication with your resident so that you're not having to coordinate all that, but you can still stay in the loop and see what's going on. Not only that, but they make invoicing 100 times easier. The vendors that we've onboarded love PropertyMeld, and the tenants love the ability to keep up to date with their maintenance requests without having to call the office or email somebody. So if you own a property management company with a few do yourself a favor, check out PropertyMeld. I think you're going to be really happy with how they streamline and optimize the maintenance division at your company. Go to propertymeld.com to learn more. Thank you so much to PropertyMeld for sponsoring this episode.

I want to step through the process a little bit just for anyone who's curious, or I don't know, maybe there's some listeners who are considering this. Let's pretend that my company was 10 times bigger than it is. And that we were in, in your kind of strike zone and we started talking, like, what would I expect to hear from you that would be quite a bit different from conversations I might be having with other potential acquirers?

Yeah, well, so maybe we could have the landscape of, of what the acquirers could be, right? And, and, and by the way, this is, I'm gonna, I'm gonna make some generalizations 'cause every buyer's gonna be a little bit different. There's unique things to every person. Every buyer, every entity. So, but broadly, let's say you were larger, you might go and if you talk to traditional private equity, they would say, okay, great. You've been on this trajectory. Let's say you've been growing 12% per year. In order for the math to work out on our end, we want you to start growing 20% per year and we want to go and tack on 15 more businesses that are going to, they're going to create synergies, right? With the core existing business. So maybe it's We're going to centralize back office staff. Maybe we're going to create systems that are shared across all the companies. Maybe it gives us some buying power with some technology that maybe we wouldn't have. But the play is generating economies of scale and increasing growth rate so that in 3 to 5 years, maybe even sooner, we can then sell it to this other group over here who we know that would buy us. And I come to you and I say, hey, this is the plan. Cards up. I'm not going to tell you something that's not true. We're going to skinny down your costs. We're going to try to grow this thing. We're going to make these very strategic reinvestments. We're going to try to roll it up, then we're going to go sell it. Do you want to be on board for that? And you may say, sounds great. I would love to have a second bite of the apple in 3 to 5 years. You all know how you're doing this. You tell me what to do. I'm on board. Let's roll. That would be a traditional private equity kind of deal.

And in that scenario, I think they call this roll equity. So I would sell 85% or whatever the number is, I would sell a majority stake to to the private equity group. I would keep some equity that's like a portion of my payment or whatever, and then that's like incentive for me to keep go—

like keep going. Correct. And most likely the deal would be, uh, highly levered at close, right? So there'd be a lot of debt being used. So your equity that you're rolling over would be larger than you'd expect based on the debt used, which is a benefit in some ways, right? It also makes the business more risky. It takes kind of the steel out of the bridge, to use that analogy. And there's a lot of challenges with it. It only helps the buyer and the seller. It doesn't help the leadership team. It doesn't help post-close operations. It doesn't help the communities or the employees or the vendors or the customers. It only helps the buyer and the seller. So there's a lot of costs and some externalities that are not borne by the buyer and the seller in that situation. But yeah, that's the pitch. Peter, you and I, let's team up. Let's load a bunch of debt on this thing. Let's giddy up. Let's go acquire a bunch of other stuff. Let's get it all blended together. Let's show a really big EBITDA number and let's go sell it to somebody else. That's kind of the traditional private equity pitch. A version of that is a search fund, right? And if you were 10 times larger, like kind of in the zone that we are, that's a pretty large search fund bite. But let's just say for argument's sake that a search fund came to you. A search fund is a group of investors that back a person or people, could be a couple people, who have a thesis and want to go out and let's say the thesis is acquiring a property management company. They come to you and they say, "Okay, great. Hey, Peter, really appreciate it. We want to buy the business from you. You're going to go exit stage left. We're going to run the business and we have the capital from these investors that we're going to be investing in your business, and then they're going to be funding future acquisitions." So the only difference between traditional private equity and a search fund is maybe a little bit less leverage, a little bit smaller deals typically, and then the leadership is going to be comprised of the searcher or searchers post-close. Got it. And then you've got this big swath that's called family offices. And family offices, the joke is when you've met one family office, you've met one family office. Like there's no two family offices that are the same. Typically, if they're more professionalized, they come from a private equity backgrounds, they're going to run things no matter if their time horizon is actually quite long. Usually most of the time is they know how to run things in a traditional private equity style, so they're typically going to use a lot of leverage, shorter time horizon, all that stuff, but they don't have to. Occasionally you've got what we call retired operator who has decided to move from operating to investing assets that's usually theirs, and then that flavor just gets wild. I mean, that can be all over the board in terms of what's possible. And it's just a matter of just listening and trying to understand what's the track record, what history do they have of doing whatever they want to do with you, and what's the offer.

And then how would it work, you know, if I was approaching you, Brent?

Yeah, well, first of all, we would probably tell you that we try to talk you out of selling the business because selling the business is always, if you, if you want to look at just straight returns, it's always more profitable. To retain a business than to sell it, right? If you're trying to time the market to get like the biggest multiple you can, if you're trying to pull one over on the seller, it's just probably not going to work great. You know, maybe you can do it, but that's not a good motivation. So the motivation is, hey, you really believe in this business, you want to sell it to us, we'd say great. We're typically going to use no debt in our transactions. So there's going to be no— so post-close, there's going to be no operating leverage put on the business. We want a clean balance sheet and we want to operate from a position of strength. We also have no time horizon that we want to sell the business. So we want to say, "Hey, what does this look like long-term? Are there things that we can do long-term?" Again, long-term isn't by itself, long-term doesn't do anything for you. It just enables you to do something. There's nothing magical about long-term if you're not going to do anything. You can actually do something with the long-term. So we would say, "Okay, why would this be a business that we can reinvest in? Are there reinvestment decisions that we could make today that maybe wouldn't show up for 3, 5, 7 years down the road?" down the road, but you know are the right decisions to make. You can't make good long-term decisions with short-term capital. So that's the thing that we're enabled to do that almost no one can do is ask those types of questions. You know, we would say, hey, we have a preference for working with leadership that's already in place. So, you know, Peter, would you like to partner with us? Now, we're also going to be really honest with you that, you know, if the business is small and you've been at this for a while, there's probably some deficiencies in leadership. Maybe even with your leadership that we got to work on. And we want to be real transparent with you on that. We want to call you up. We're not calling you out. We're calling you up into something better. So what's the highest and best use of your time? Where can we surround you with a team, by the way, that you have input on, of course, as well, that we can help take this business to the next level? You know, one of the challenges with smaller businesses is for the most part, if you're a highly skilled employee or you're a highly skilled service provider, You don't work with small companies. And when I first say that to people, people are like, wait, why is that? And you're like, okay, well, let's just say you're an incredibly talented marketing agency, right? Well, you have your pick. You can go work with Apple or Ford Motor or Peter's property management business. And Peter's property management business can pay you $50,000 a year. And Ford can pay you $6 million a year and Apple can pay you $30 million a year. Any business owner, there are sure exceptions, of course there's always exceptions to every rule, but for the most part, the only people who serve small businesses are people who can't serve larger businesses. Same thing for employees. For the most part, the employees that work in smaller companies can't work in larger companies or faster growing companies. Now, again, it's not a perfectly efficient system. There's plenty of reasons why people would, and we find, by the way, incredible talent that's hidden within these companies that we acquire. But you've always got to come from the assumption that, okay, look, all things being equal, somebody who, it's not like Elon Musk was like, man, I could start a space company or I could work at Joe's Plumbing Company. I mean, really highly talented, highly motivated people, typically are not going to be found in these smaller companies. So one of the things that we would say is we have access to a talent network and we want to surround you with people who you can get access to a different level of service provider and a different level of employee than you typically are used to by the nature of us using our heft and our network to be able to find them and help them to see that there's a bigger picture. They can go do a tour of duty and potentially even run something else within the system. So we're able to— that's a really successful part of what we're able to do is upgrade the talent both internal and external talent at a lot of these companies.

Got it. And I love that you're so transparent about that. I've not heard a lot of people speak that candidly about the realities of being a small business owner and the team and the vendors that you have access to. I think quite frankly, a lot of people would probably be really turned off by what you just said. As I think about my property management peers, But I think that's probably a good thing because they are going to self-select out from this theoretical process that we're running, right? You want— I think one of the things that you're super skilled at is being incredibly transparent and clear with folks who are thinking about selling their business on, hey, like you just did it. You painted the whole picture of the landscape. You're like, we try and talk them out of it. You're going to make more money if you don't sell. If you do want to sell and you want to sell to us, by the way, here's some things to think about. We may be swapping out leadership. We may be upgrading different parts of the business that you feel are working fine. Whereas you definitely get the sense from the private equity folks and maybe even some of the other groups that you mentioned, like they try and paint this picture that's just all positives, no downside whatsoever, right? Everything's going to be the same or better. Every area, every You're going to make more money. You're going to be happier. You're going to have less work. Your team's going to be happier. Right. So just, I appreciate as another Midwesterner, like keeping it real. Right.

Yeah. Well, my question is for people who paint that picture though, don't you have something inside of you that says, wait, so everything stays the same. It just gets better. And the only thing that happened is somebody else's name is written on the equity table. So there's no changes. It's only upside. It's all rainbows and butterflies. And the only difference is just somebody else owns the equity of the business. That doesn't make any sense. And I mean, hopefully the people that would be listening to this would be like, okay, in order for something to be different, something has to change. And in order for something to change, somebody has to do the work. And if things were going to change anyway, then why haven't they changed?

Right. These groups, you know, they've got really compelling salespeople. They, they're very good at painting a rosy picture. I, I've talked to some of them and I've— some of my buddies have talked to some of them, and then they, they've got big ideas.

Yeah. Well, and by the way, I mean, and that's not to say that there isn't upside. Like, I don't want to give the impression that— I mean, there is tremendous upside. I think it's just being honest and transparent with people about what does that upside look like. There's always a cost., right? In order to change the trajectory of a business, there's a lot of work that has to go into it, and there's a lot of skills you have to acquire to do it. There's just no way to get around it, right?

Somebody's got to do the work. Your, your point about like the quality of kind of the vendor network that we have access to, like the marketing agencies and the website companies, and that hits so hard as a property management business. We need so many vendors, not only to run sort of our corporate side of the business, but also like to actually do all the work at the properties, right? Plumbing, electrical, HVAC, everything. Given what you just said, which is that the best service providers serve the largest companies, what are some tips and techniques I can use as a small business owner to sort of filter through the, the world of nonsense and actually get some quality people to help me grow my business or help me solve problems at my company?

Man, I have a trick for you. I learned it from Larry Bird. So I call this the Larry Bird technique. When Larry Bird was entering, so he's from French Lick, Indiana, country boy, didn't know much about the world of professional sports and he's entering in the NBA and he has no idea how that works. No idea. He has no connections. He's just a guy from the middle of nowhere. And he says to himself, okay, How do I figure out who the best is and who I should hire? Because I have no relationships, I have no way to ask. And of course, everyone you ask is going to say, well, it's me, or it's this guy that I have some kickback from, or whatever. And it's just, you know, it's tough. I feel like this is the same situation that most small business owners are in. It's like, you know, they ask their friend and their friend recommends this agency they have a relationship with, and it turns out they're not going to be good for them. And it's just, it's just this never-ending treadmill of relationships. I mean, literally, we had a A business we looked at buying a couple years ago that they said, "Hey, all marketing's BS because we've gone through 12 marketing agencies in 15 years." And we're like, "Yeah, because the people who you're serving, if they really knew how to market, how to really drive sales for you, do you think they'd be serving you?" And it was like this lightning bolt that went off with them. They're like, "Oh crap, you're right." So here's the question. So here's the technique. What did Larry Bird do? Larry Bird put out a note to call it 15, 20 of the top agents in the business. And he said, "Two questions. Why do you think that you should be my agent? So give me kind of the pitch on why you think that you should be my agent." And really that was the red herring. The second question was really what he wanted to ask them, which was, "If I didn't pick you, who should I pick?" So he got back responses and almost unanimously, Everyone said, "Well, of course you should choose me, but if you're not going to choose me, you should choose this guy." And that's who he ended up picking.

So smart. Right?

Yeah. Love that. I think it works the exact same way with vendors. So all I would do is I would get a bunch of the best marketing vendors you could say, and I would ask them that question. I would say, "Why do you think it should be you? And if it's not you, who should we pick and why?" That's going to be your map.

I love that takeaway for, for listeners. I did want to ask you about the debt question. So you kind of famously do not— not only do you not lever up, you don't use any debt when you buy a small business. Why not just do like 30 or 40%? Like, to me, that seems like you can now buy almost twice as many companies given the same, you know, fund size. It's still relatively low risk. You haven't removed too much steel from the bridge. Give me, like, what am I missing there on that?

Yeah. So let's go back to the very first question you asked me, which is what are we buying? We are buying loosely functioning disasters that sometimes happen to make money. So what's the one thing you probably don't want to do to a loosely functioning disaster? Add more risk to it. Right? Now, this is a very broad brush. I would say is there are certain business models that can sustain fairly large loads of debt. So if you have a recurring subscription business, and in fact, property management may be a business that can sustain more debt. I haven't dug in enough to know. I haven't looked at the— I'm sure it depends on the flavor and the style and all that stuff. But my guess is if you have a highly stable revenue base, you can really pretty highly predict what your revenue is going to be, or at least the minimum your revenue is going to be, And you know that your customers are fairly sticky. Of course, you can, you can absolutely add debt to that business and you'll probably be fine. The issue that I've seen is I have literally never in the history of my career, and I've reviewed thousands and thousands and thousands of deals, I've never seen a successful small business with operating debt on it, ever. So why is that? Why is it that I've never in the history of seeing all these companies seen a business that doesn't have debt on it. It's because families know that if you put debt on it, they don't survive. Over a long enough period of time, something will happen. There'll be a high enough variation that something will happen. And I'll use example of this. So we bought an aerospace business in the fall of 2019. And if we try to get back to the mindset, don't remember what happened now that we know in hindsight what happened. Let's go back to the fall of 2019. Economy's rocking, Everything's good.

And the people we're working with—

Zero interest rate environment. Zero interest rate environment. People we're working with are like, "Okay, you guys for sure are going to use debt on this, right?" And we're like, "No, we're not going to put any debt on the business." They're like, "Are you dumb? What in the world are you talking about? The aerospace business is at worst flat. It never goes down. It's bulletproof. It never goes down. Everything's great. Why would you not use debt?" And we said, "Hey, look, here's our philosophy. Our philosophy is we don't feel like that's kind long-term oriented. All we're doing is we're pulling future returns into the present and over-consuming. That's really what debt provides you is the ability to over-consume today based on pulling things from the future into the present. We said, "We're totally fine generating a lower return, but a more stable return. When something goes haywire, and it eventually will, and it may be 15 years, we think that we'll be able to reinvest in that business in a way where our competitors can't." And the people told us that we were idiots. And look, I'm not saying that we had some crystal ball. That's not the point. The point is not that I somehow foresaw COVID happening and the largest drop in the history of the aviation industry, anything like that. But I can tell you, we made 10 years of progress in about 18 months in that business. That business is worth magnitudes more now than it would've been worth had we put debt on that business. In fact, if we'd put any debt on that business, very likely we wouldn't own it today. So it would've been a zero for us. So yeah, we would've had the upside opportunity to generate higher returns on equity, but very likely that we would've gotten zero on the equity that we did hold. So my argument is broadly that we think that by the nature of having a debt-free balance sheet, that we can reinvest back in the business, that helps everyone. It creates a system where it's a win-win for all the stakeholders, not just the buyer and the seller, better. And when the time comes when our competitors are running for the hills, we can do exactly like we did with Packair, our aerospace business, and we can be the only ones hiring. We're the only ones with cash. We were able to get incredible deals and we were able to take, again, get about 10 years of progress packed into about 18 months. That's what we think are generating actually higher returns over time. It completely changes trajectory of that business. And I think it created tens of millions, if not hundreds of millions of dollars of value in a time when the exact opposite would have been true if we'd used only a moderate amount of debt.

Very Berkshire-esque in my opinion. I can hear the Charlie Munger and the Warren Buffett flowing through this discussion. Yeah, when I was listening to your episode from 2016 with Patrick, you used the phrase disaster resistant a lot during that conversation. And I wanted to ask you, and you kind of just answered it, but is that still a big focus of your strategy and how has it worked? I think you've just answered that. It's worked quite well. We had a big disaster in 2020 for those who don't remember. And like, did it— did you feel a little vindicated in that moment and did it sort of reinforce, okay, yes, this decision I made, which was to be very conservative with debt, to have a focus on being disaster resistant. This is the right path. We're going to stay the course. It might be another 10 or 20 years before the next disaster hits, but when it does, we'll be ready.

Yeah, I mean, I would say it reaffirmed that the— for us, the future is unknown and unknowable. And look, there are people whose track record points to the fact that they can predict the future. I mean, they're very rare., but there are people out there who can see around the corner and who can predict things I can't predict. And look, if you're one of those people, it's probably not you, but if you're one of those people, then kudos to you. You can do things that others, us mere mortals can't do because I literally can't predict the future. All I can do is I can create a situation that gives me high optionality and an ability to move in whatever direction we need to move in. So actually, we just had an investor summit. I told told our investors during that summit, I said, look, I have no idea if rates are going to go up, stay the same, or go down, but I know that regardless if rates go up, stay the same, or go down, we're going to be just fine because we have plans for each one of those to be disaster resistant. So we're totally fine with rates going up to 12, 13, 15%. We will thrive in that environment. We'll thrive right now, and we'll thrive if rates go down. We'll be just fine. Now, if I could tell you I know exactly what's going to happen with rates, then it would be a completely different scenario we'd be talking about. Of course, we would be acting differently. I just don't know anybody who can actually, over a long period of time, accurately predict the world. It seems like at best, people get like one insight, maybe two insights in their lifetime about some big shift that they are, for some reason, able to pattern match and see. And then for the rest of their life, they're changing or, excuse me, chasing that feeling and chasing that desire, and they blow themselves up. I mean, if you look at a lot of the people who predicted 2008, they predicted the next 17 recessions that never came. So look, you can be right and still be wrong in the long term. And I think that's the thing we're trying to do is we're trying to, wherever the future holds, we're trying to be as resistant to disaster as we possibly can. And yeah, I look at it as a core part of what my job is. And it's really, really hard, by the way. Let me not understate this. 2021, really like second half of 2020, 2021, and early part of 2022 was brutal for us. We were getting outbid by like 50 to 100% on deals consistently. We didn't change our underwriting, and we even had one of our larger investors said to us, hey man, like you might want to think about just going ahead and paying up more and using some debt and like adjusting your model because If you go back and look, people have been rewarded for that over the last 10 years. And I just, I mean, we had internal discussions, we went round and round about it. Ultimately stuck to our guns and thank God we did. But it was a major defining moment, I feel like, in my career where it was like, okay, feeling the pressure. I mean, look, people are making $100,000 a day buying digital monkeys, right? I'm like, I don't know what that world is. That's not my world at all. And by the way, I'm totally happy people getting filthy rich doing things that I'm not doing. In fact, I'm happy if people get rich doing exactly what I'm doing. All I can do is say, okay, I've got what's right in front of me. I've got my mindset that works for me. If you look at the book The Outsiders, right, Will Thorndike's a friend of mine, unbelievable guy, unbelievable book. But the key takeaway from that book is there's a lot of ways to do this life. There's a lot of different styles. And by the way, all these styles work, but each person was responsible for the style that was good for them. Buffett's not trying to be John Malone. John Malone's not trying to be Henry Singleton. Everyone's got a different flavor of what they're trying to do, and they go execute on that strategy. They have a clear vision. They know who they are. They know who they're not. And for us, we know who we are. We're not the guys to go and lever up. We're not the guys to go and buy a bunch of trendy tech stuff. We like fairly straightforward businesses that are durable, that have been around, and we like to pay a fair price for them. And hold them for as long as we possibly can and be good stewards of them.

I love it. I think it's a perfect way to cap off the episode. Brent, thank you so much for coming on the show. For folks who want to follow along with your journey, maybe they're interested in learning more about Permanent Equity or maybe investing or selling, anything along those lines, where's the best place for them to do that?

Yeah, I'm pretty easy to get ahold of. So Permanent Equity website, we've got a tremendous amount of information, just permanentequity.com. I'm on Twitter, on LinkedIn. I mean, I'm, I'm pretty easy to find. So I would just say, if you got something to talk about, reach out and I'll try to be responsive.

I'll give a shout out for your newsletters. You've got a couple great newsletters that you can subscribe to there on the website that I'm a big fan of. I often forward them to friends and other business owners. So if you're not already on that list, uh, encourage listeners to get on that. Thank you so much, Brent.

This is awesome. Hey, thanks a lot, Peter.

Appreciate you for having me on.

I hope you have enjoyed this episode.

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Thanks again for listening and have a great week.