Five years ago, I discovered the Long Island Greenbelt Trails, and I became obsessed with the idea of running from the North Shore of Long Island to the South Shore.
About 9 months ago, on a whim (and without consulting my loving yet skeptical wife) I signed up for the Shore2Shore 50k Ultramarathon which I ran on Saturday.
Check out this video to understand why the S2S 50k was so challenging.
It was one of the hardest things I’ve ever done.
If you adjust for the difficulty of the trails, it was probably the equivalent of running over 50 miles on paved roads.
My Garmin watch estimates that I burned over 5,000 calories.
My strategy was to target an average heart rate of under 140 BPM.
I knew that aerobically I could go all day long. The question was how long my hips, feet, knees, lower back and nervous system could endure the abuse.
There were three different times I hit a low where I was ready to hike out of the woods and jump in an UBER.
At one of those low points, another runner said to me: “Just keep going, there is a second wind just around the corner.”
Around mile 18, I started to pass other runners that had hit the wall.
I just kept shuffling along, targeting 137 beats per minute.
For inspiration, I was playing Coldplay’s Lovers in Japan over and over again, and as I passed the other runners, I got so emotional that I almost cried.
That was when I knew I was going to finish – even if I had to crawl.
On Sunday, I could barely walk.
I made it outside once to walk two blocks to Tal Bagels.
I spent most of the day on the sofa watching Physical 100 on Netflix with my kids.
I told my wife (who was relieved that I hadn’t dropped dead on the course) that I NEVER EVER need to do that again. “I’m one and done.”
However . . .
. . . now that my batteries are recharged . . . and I can walk again, I believe it is really important to keep doing really hard things, especially as we move through mid-life.
There is a second wind just around the corner.
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In 2013, I joined Time Warner to help lead the spin-off and IPO of it’s publishing division — Time Inc.
The iPhone (which had been launched six years earlier) was rapidly moving up the adoption curve, as was social media. The net result was that our magazine newsstand and subscription businesses were under immense pressure.
Time Warner’s approach (before the IPO) had been to focus Time Inc. on being a print publisher.
This had left us woefully unprepared for a digital future at the time of our IPO.
Sport Illustrated didn’t even have a website. Officially, all of the digital was to be funded, developed and operated by Turner — another division within Time Warner.
We needed to quickly begin developing a pipeline of growth initiatives to extend our brands. Time Inc. was a house of more than a hundred individual magazine brands primarily focused on producing a print product.
However, there were pockets of innovation (e.g., maverick groups that under the radar had quietly launched and self-funded sites, social media, digital video, licensing, products, events). I met with our brand leaders from around the world. We brought those ideas back to the leadership team and cascaded them through the organization.
We also studied what our competitors were doing like Buzzfeed and the New York Times (which was years ahead of us in transitioning into a digital-first news platform). And, we copied them shamelessly.
In the early days of developing our growth pipeline, we funded hundreds of small trials. We called it “planting trial and error seeds” to learn which areas would produce green shoots. We quickly killed ideas that were faltering, and pyramided more funding into areas that were showing promise.
By the time we sold to Meredith in 2018, we’d bought, build and partnered more than $1 billion of digital and adjacent revenue.
We’d positioned the company — and designed a blueprint — to successfully build a bridge to a digital future.
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“When masses of people succumb to an idea, they often run off at a tangent because of their emotions. When people stop to think things through, they are very sane in their decisions.”
Humphrey B. Neill
When I first started on Wall Street, I worked for Peter F. Marcus. He was brutally tough, but also like a father — a real mensch.
In my first weeks on the job, he gave me a book called The Art of Contrary Thinking by Humphrey B. Neill.
He told me that if I wanted to be successful in my career and life, I had to make my own path, and develop my own ideas. And, the first step in doing that is to be a non-conformist when using my mind.
The book changed my mind . . . and my life.
It set me on a path that was uniquely my own.
Let me be clear, I’m not advocating knee-jerk contrarianism. If the train is coming down the tracks, and everyone else is stepping out of the way . . . you don’t remain on the tracks in the name of contrarianism.
However, in emotionally charged and uncertain situations, it is human nature to seek the comfort of the herd — and to look to others for confirmation of our ideas.
The problem is that the crowd does not think, but acts on impulses. For this reason, widely held public opinions are commonly wrong.
To break from the pull of the crowd, requires something that Howard Marks of Oaktree Capital refers to as Second-Level Thinking.
“First-level thinkers look for simple formulas and easy answers. Second-level thinkers know that success in investing is the antithesis of simple.”
Howard Marks provides the following elements for second-level thinking:
What is the range of likely future outcomes?
What outcome do I think will occur?
What’s the probability I’m right?
What does the consensus think?
How does my expectation differ from the consensus?
Is the consensus psychology . . . too [optimistic] or [pessimistic]?
What will happen . . . if the consensus turns out to be right, and what if I’m right?
Over the past nearly 30 years — since Peter Marcus gave me Humphrey B. Neill’s book — I’ve trained myself to be a contrarian thinker.
This doesn’t mean that I go into meetings and habitually take the opposite position.
But it has allowed me to understand that in most situations, there is a sub-conscious (emotionally-charged) force that is influencing the team — and frequently standing in the way of progress.
In my work as a transformation leader, my job is to help the team to see things in an unemotional and more logical way.
To bring them together around a more favorable future state.
In this way, I think of myself as a “Horse Whisperer” in and around emotionally-charged situations.
If you are interested in engaging further in this conversation, I’d love to go on the journey with you. Please subscribe to my free newsletter/blog; and please pass it along to your friends.
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“I’ve lived my life in situations where I’ve come from nonexistent or last and been able to find my way.”
Barry Diller
[My views are my own]
I’ve dedicated the past decade of my life to helping companies pivot, reposition, return to growth . . . and make a comeback.
Given the power of disruptive innovation in the global economy, which I wrote about here and here, there is a nearly endless supply of new and interesting challenges.
For me . . . the comeback is not just a job . . . it’s a deeply ingrained philosophy.
I believe that the key to a life well lived is to strive and reach for more (like a child learning to walk) . . .
. . . to experience painful failures along the way . . .
. . . and to learn from those painful failures.
When I look at everything I’ve learned over the past 50 years, it’s a continuous string of thousands of mini (and some not so mini) comebacks.
If you are interested in engaging further in this conversation, I’d love to go on the journey with you. Please subscribe to my free newsletter/blog. Also, please follow me on Twitter, connect with me on LinkedIn, and post a comment below. I’d love to know what you think.
“The reason that I invested in China is they have much better companies at lower prices. So, I’m willing to take more risk.”
Charlie Munger
One of the investing lessons that I’m teaching my children is that you get paid for your ability to stomach uncertainty, volatility, and risk.
Over 30 years as an investor, hands-down, I’ve made my best investments when I’ve been terrified.
As I wrote here, my approach to investing is to “aggressively deploy capital during recessions,” to invest in “cycles of panic” which happen “like clockwork, every ~18 months,” and to “buy companies . . . that are emerging from nuclear winter.”
My discipline as an investor is to be a liquidity provider when others are panicking and heading for the exits.
During the March and May sell-offs, I started loading up the truck with shares of Alibaba (BABA-NYSE; 9988-HK).
Alibaba is the largest e-commerce company on the planet. It has been called the Amazon.com of China. It’s share of Chinese e-commerce is 55%, and it’s share of cloud computing is 45%. Other assets include $68B of cash and equivalents, $25B of investments in Chinese public companies, and a 33% stake in Ant Financial (which own’s Alipay, the world’s largest mobile payment platform).
With Chinese internet ETF KWEB down 70% since February 2021, the tail risk narrative appears to have become the conventional wisdom.
This doesn’t mean that I won’t be wrong.
The Chinese property crisis could push China into an economic depression. China could invade Taiwan, and I could be forced to sell my shares due to sanctions. Emerging mobile commerce competitor Pinduoduo could disrupt Alibaba. The ADS shares could be de-listed.
However, if I’m right, I think there is a good chance to make 5x or 10x my money over the next 5 to 10 years.
The bet I’m placing is that:
(1) Alibaba is one of the highest quality businesses on the planet today. The company will effectively monetize the emerging Chinese middle class over the next decade-plus given extremely strong network effects.
(2) Despite the political rhetoric, Chinese Communists understand that to stay in power, they require a strong economy, access to capital markets, and powerful global companies.
(3) The company will continue to aggressively repurchase deeply discounted shares with it’s strong free cash flows.
(4) If the U.S. shares are de-listed, I’ll transfer all of my ADS holdings to the Hong Kong-based shares (which I also own).
(5) The current valuation implies that Alibaba will have no growth in the future — which I think is unlikely.
On valuation, my preferred approach is to compare the company’s Enterprise Value to the perpetuity value of it’s trailing cash flows (more on this in a future post).
Enterprise Value / [(EBITA * (1 – tax rate) ) / weighted average cost of capital]
On this measure, companies of this quality normally trade at a ratio 2x to 3x (or more during boom market conditions). Today, Alibaba trades at approximately 1.0x net of cash and minority investments. At the March lows, it traded at a >30% discount (or <0.7x).
Alibaba is very good and cheap — a rare combination!
As a final thought, Alibaba stock could definitely go lower from here. I’m not a trader looking for a quick pop.
In fact, the one common characteristic of almost every single big win I’ve had as an investor is that I was early. Early . . . but right!
In addition, if the we get a deep recession, as I wrote here, all stocks are likely going lower.
“I hope I live long enough to see a couple of recessions in this country. It is the nature of capitalism to periodically have recessions. People overshoot. So, it isn’t the end of the world. I mean, as a matter of fact, for an investor, you know, it turns out to be the times when you make your best buys. I made by far the best buys I’ve ever made in my lifetime in 1974. And that was a time of great pessimism and the oil shock and stagflation and all those sorts of things. But stocks were cheap.”
Warren Buffett
How I prepare to navigate a potential recession scenario is with cash and equivalents. Enough cash to buy more shares at lower prices; and, enough cash/liquidity so that I don’t have to sell my shares if there is a personal adverse consequence in my life.
The name of the game is to buy excellent companies when they are covered in uncertainty (preferably during recessions and market panics), and to hold them through the cycle.
If you are interested in engaging further in this conversation, I’d love to go on the journey with you. Please subscribe to my free newsletter/blog. Also, please follow me on Twitter, connect with me on LinkedIn, and post a comment below. I’d love to know what you think.
“The goal is not to have the longest train, but to arrive at the station first using the least fuel.”
Tom Murphy, Former Chair and CEO of Capital Cities / ABC
My starting point for evaluating business decisions, and making investments is Return on Tangible Capital (ROTC).
It is a measure of the cash generated by the business relative to the tangible assets deployed in generating that cash.
EBITA * (1 – tax rate) / (net working capital + PPE)
It’s essentially applying bond math to businesses, investing and management.
In other words, if a businessperson paid to build or own those tangible assets, what would be the yield on their money.
In general, bigger numbers (yields) are better when it comes to creating shareholder value.
But, to generate a big number (or excess return), the company requires some form of advantage.
Without a sustainable competitive advantage (or moat), other businesses will copy what you are doing; they will enter your business; and, they will drive down your returns.
Executives and investors would benefit from asking themselves what they (or their company) is doing to protect or enhance those returns.
If you are interested in engaging further in this conversation, I’d love to go on the journey with you. Please subscribe to my free newsletter/blog. Also, please follow me on Twitter, connect with me on LinkedIn, and post a comment below. I’d love to know what you think.
“The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot.”
Warren Buffett
[My views are my own]
I’m no longer on Wall Street. I largely ignore the stock market machine’s daily noise. It’s dramatically improved my results.
My approach:
Ride the Big Waves. Ignore the Squiggles. Aggressively deploy capital during recessions. Then sit tight. This is how the BIG money is made.
Cycles of Panic. Like clockwork, every ~18 month, investors lose their minds with fear and panic. I ONLY invest when the VIX is over 30.
Nuclear Winter is Your Best Friend. I love to buy companies, industries and assets that are emerging from the nuclear winter.
Reading is my Edge. While I ignore the daily sound and fury of the stock market, I’m always learning. I average at least 100 pages per day.
Insider Investing is the Best. I work for (and get stock grants from) companies that I’d want to own.
If you are interested in engaging further in this conversation, I’d love to go on the journey with you. Please subscribe to my free newsletter/blog. Also, please follow me on Twitter, connect with me on LinkedIn, and post a comment below. I’d love to know what you think.
“As a wave increases in height, its mass increases exponentially, as does the energy released when it breaks.”
Jon Krakauer in “Mark Foo’s Last Ride,” Outside magazine, May 1995 issue
2008 to 2021 was the most significant period of easy money (i.e., Fed Printing) of the Post-War era.
In March of 2022, the Federal Reserve commenced the most aggressive tightening cycle since Paul Volcker was Fed Chair.
As the chart below illustrates, in virtually every tightening cycle something REALLY BIG breaks in the financial system.
So far, crypto and disruptive growth have gotten clobbered. My instinct is that the de-leveraging in the system may just be getting started.
In addition, the backdrop for this Fed tightening cycle is weak real consumer spending, as I wrote here.
For a great recent book on the Federal Reserve, check out The Lords of Easy Money: How the Federal Reserve Broke the American Economy by Christopher Leonard.
If you are interested in engaging further in this conversation, I’d love to go on the journey with you. Please subscribe to my newsletter/blog. The link is at the top of the page on a desktop browser and at the bottom of the page on a mobile browser. Also, please follow me on Twitter, connect with me on LinkedIn, and post a comment below. I’d love to know what you think.
I’ve spent the past decade obsessed with helping companies to transform.
As a senior leader at two of the biggest business transformations of our era, I’ve been honing my “Comeback Playbook” or plan for “Return to Growth.”
Recently, I’ve been thinking a lot about how this “Transformation Blueprint” would be applied to the high growth disruptors that have collapsed over the past 9 months.
My top ten list for collapsed disruptors is:
You are at war. Preserve your cash. Reduce your burn rate.
Assume that the next period of boom conditions is a long way off. Your focus now should be on preservation/survival.
Get real with your shareholders, board, employees, and customers. Get out ahead of what may possibly be tougher economic conditions in the next six to nine months.
Garner alignment at the board level. You don’t have time or energy for managing the warring factions.
Downturns almost always result in a rationalization of competition. You want to be one of the survivors to benefit from more rational market conditions on the other side.
Slow the pace of growth, and focus on fixing the machine. What are the three critical path items that you have to improve/fix over the next six months. Margins? Customer churn? Overhead costs?
Evaluate your leadership team, and their direct reports. Conditions in the market for hiring talent are likely to become more favorable. Upgrade where necessary.
Coach your team. Most have probably not lived through the Global Financial Crisis or the Dot-Com Crash. They will likely need to develop new mental models for how to operate. Help them to adapt to a war environment.
Consider a combination with a peer. Use the merger as an opportunity to reduce overhead costs while doubling down on your best talent — especially salespeople, engineers and product development.
If you are generating cash (or you’ve got excess capital), consider equity repurchase. Read up on Henry Singleton of Teledyne in Chapter 2 of The Outsiders by William Thorndike.
If you are interested in engaging further in this conversation, I’d love to go on the journey with you. Please subscribe to my newsletter/blog. The link is at the top of the page on a desktop browser and at the bottom of the page on a mobile browser. Also, please follow me on Twitter, connect with me on LinkedIn, and post a comment below. I’d love to know what you think.
“If you want to make enemies, try to change something. You know why it is. To do things today exactly the way you did them yesterday saves thinking. It does not cost you anything. You have acquired the habit; you know the routine; you do not have to plan anything, and it frightens you with a hint of exertion to learn that you will have to do it a different way tomorrow.”
Woodrow Wilson
My mother, Betty Jean (aka BJ), is from Iowa. In the 1960s, she came to New York as a flight attendant, fell in love with my father, and never went back.
She tried her best to become a real New Yorker, but she hasn’t been able to shake her easygoing Midwestern Southern Baptist temperament.
Like most New Yorkers, she learned to be an aggressive driver. Even at the age of 79, she still flies down the highway in the left lane doing 80 in a 55.
But, unlike most New Yorkers, when she gets cut-off, rather than rolling down the window and giving the finger, she puts a huge smile on her face and waves like she’d just sold her first-prize pig at the Iowa State Fair.
The powerful lesson is that my mother almost never has to pick up the hammer to achieve her objectives.
Mostly, she just smiles and waves — and keeps on driving.
In corporate transformation, there are a hundred opportunities a day for misunderstanding, hurt feelings and conflict.
What I’ve learned from my mother’s approach is to have empathy, and to give people the benefit of the doubt.
Every time I’ve reacted in anger, it’s been destructive, and I’ve regretted it.
If you are interested in engaging further in this conversation, I’d love to go on the journey with you. Please subscribe to my FREE newsletter/blog. The link is at the top of the page on a desktop browser and at the bottom of the page on a mobile browser. Also, please follow me on Twitter, connect with me on LinkedIn, and post a comment below. I’d love to know what you think.
