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Clearing Fog

My guest on this episode is a person who writes anonymously on Twitter under the pseudonym Clearing Fog. We connected a few months ago on Twitter and in this episode we talk about his career in investment banking and private equity, why he writes anonymously and his thoughts on writing publicly, and what he’s thinking about next.

Episode Description

My guest on this episode is a person who writes anonymously on Twitter under the pseudonym Clearing Fog. We connected a few months ago on Twitter and in this episode we talk about his career in investment banking and private equity, why he writes anonymously and his thoughts on writing publicly, and what he’s thinking about next. I don’t come across many people in traditional finance careers who have a blog and Twitter account and I thought it would be interesting to hear from someone who thinks a little differently.

Please enjoy, I hope you like the episode as much as I did.

Clips From This Episode

What value have you changed your mind about?

What's the best business you've seen?

What college class would you teach?

Business school

Setting goals

Do you want to just start by going over your background? How’d you get into private equity? Why’d you choose it? Kind of along the lines of the letter to your younger self, which was fun to read, I’d love to hear about that part.

Yeah, sure. I’m in private equity now. Been in it for probably six, or seven years. Prior to that, I did investment banking. Pretty standard. To get into private equity, you have to do investment banking. Prior to that, I went to a pretty small liberal arts school.

What’s interesting is, growing up, I had zero clue what finance was. A town with 800 people, my graduating class was 13 people. I went to a small liberal arts school. This isn’t the reason I tell when I’m interviewing, but the reality is the reason was because my sister was there. I had gone there a couple of times to party, enjoyed it, liked the small class sizes, and thought I could do well there. Around my first year there, I realized that I didn’t know exactly what I wanted to do.

A friend of mine who was at the University of Michigan started talking about investment banking and finance. Did a ton of research into what exactly that was. I realized, “Oh crap, I probably picked the wrong college.” So, I can do two things. I can either hit the ground running, or hit the pavement really and start cold calling, cold emailing, and trying to get connections, and network my way in, or I can transfer to a bigger, more name brand school.

Ended up choosing the former. I would spend 10 to 15 hours a week cold calling and cold emailing. I met a ton of people, a lot of connections. Ultimately, was able to get an internship my junior year, which then I parlayed into a full time offer with a middle market investment bank. So, investment banking can be cheered into, there’s bulge bracket banks, that’s the Goldman’s, the Morgan Stanley’s, Citibank’s of the world. Then there’s middle-market banks, William Blair, Houlihan Lokey, Baird, Lincoln International, and then below that, there’s 10, 20-person banks across the US. All of them are similar, in that it’s an M&A experience where you’re buying and selling companies, and investment bankers facilitate that sale process.

The reality is what attracted me to it was one, it’s obviously a lucrative career. That was an attractive aspect. Anyone who tells you differently is probably lying. The second aspect is that it is very challenging. It was obviously very challenging to get into, and the job itself was hard. Everyone has war stories in investment banking. My typical day was I would get in at 10:30 AM, and I would leave at three 3:30 or 4:00 AM. I worked all weekend. Sundays, I would get in the office at 9:30, wouldn’t leave till 11:00 PM. Saturdays were better. There were probably only eight to nine hour days.

That I did for a year and a half, and then for a lot of people investment banking is a stepping stone to what I’ll say is on the buy side job, whether that’s private equity, hedge funds, corporate development, which is just M&A for a corporation using their balance sheet. So, going in, I’d say probably like 10 to 15, maybe 20% of investment bankers stay on that career path within investment banking. A lot of them are doing that as a stepping stone to another job. So, going into investment banking, going into my internship, obviously I didn’t even know what private equity was at the time. Started learning about that when I was interning.

Once I got my full time offer, was there full time. Realized that was the route I wanted to take. To me, the way I characterize it, is it’s a fundamentally different lens with which you view the world, between private equity and investment banking. In investment banking, the end result or your end goal is to ultimately sell a company at the highest valuation. So, you’re marketing an asset, and you’re marketing and ensuring that whatever price is paid is the highest, because that is your end goal you don’t care, you don’t have the same intellectual rigor around it.

If you find a narrative, or a story that ultimately supports what you think is a high price, and so it’s supportive to the story, that’s what you put forth to the market. You’re not looking at the next level layer, and saying, “All right, yes, that story maybe makes sense, but what are the contingencies round it that prove it wrong?” All you’re doing as an investment banker is saying, “All right, these are all the ways I can spin it to be great, and let’s ignore all the bad stuff, and we don’t even really need to go down that rabbit hole.”

That’s probably a little bit harsh in that obviously they still have to know the big picture and understand the risks around it so that they can mitigate them, and talk through them. It’s a completely different way of looking at it when you’re on the private equity side. You have to buy this and you have to live with it for five to seven years, and so you do a ton more work, you understand it at a much greater level than the investment banker.

It’s that different approach where really, what it comes down to is it’s a more intellectual honest approach. I would say it’s more illustrative of what is reality. So, what makes this business tick? Why does this business ultimately exist? You get closer to that portrait. That’s what is interesting to me, and that’s what pushed me into private equity.

Been in private equity for six, seven years. Was at a fund for three years. You typically do a common associate program, which is two or three years, and then a lot of times required to get an MBA. I was fortunate to get my current spot now where they allow you to advance to partner without an MBA. So, within private equity, there’s three or four levels. At the top part it’s founders. At the end of the day, you can have a 20 person firm, but a founder, or two founders make solid decisions.

That’s pretty typical across private equity in the United States. After that are partners, partners, managing directors, basically whoever’s directly below the founder. Those individuals are full leading the deal teams. So, if there’s a portfolio company, they’re the ones interacting day to day with the CEO. They’re providing that full picture to the founder, or to the investment committee of, “This is why I like the deal. This is the problems that are going on within our portfolio.” They’re spearheading that next.

Next you have mid-levels, which are VPs and principals. They’re doing the full execution of the deal. So, in private equity, you basically bring together accountants, consultants, tons of lawyers, tax guys, insurance. You bring them all together. Create a pretty comprehensive diligence package. That’s what the VP facilitates and does. Then the associate below that provide the support in terms of crunching the numbers, doing analysis at the direction of the people above them.

That’s the fundamental structure of a private equity fund. Again, I’m at the mid-level spot. Typically, you’re on two to four portfolio companies. In my case, I’d probably split my time, 50% between the portfolio itself, 50% new deals. COVID-19 has shifted that pretty dramatically to 99% portfolio, 1% new deals. It’s been an interesting shift, but that’s probably a little bit of a long-winded answer to my background, and based in New York City now.

Oh, and then briefly on why I sometimes write on Clearing Fog, and why I am anonymous is, one within my industry it is FCC regulated. There is, I would say, just noise around advertising, around being public with information. Personally, the risk/reward between being a real name and real profile versus having an anonymous profile, it just doesn’t make sense. So, I happily just write under a pseudonym.

What’s driven that is, one, didn’t get an MBA. So, I have to supplement that, and I didn’t go to a prestigious school by any means. An undergrad, so I have to supplement that network by meeting new people. Website, my Twitter, are obviously a way to do that, and generally just intellectually curious. I met a lot of great people and friends through Twitter, a great resource and platform to share and learn. I’m hoping to, because of this podcast, hopefully start writing more and building more presence.

What would you write about?

That’s a good question. I have an incomplete blog post on value propositions. I’d like to complete that. I would say I struggle with writing sometimes in terms of … I don’t like the word perfectionist, but there’s always nuance that is very hard to convey in writing, where very rarely do I make a declarative statement without numerous caveats around that. It’s difficult for me to put something on a page and then say, “All right, well, there’s all these nuances that don’t make it an absolute truth.” So, that’s probably why I don’t write as much as I should.

That’s one thing that I will finish. I will get to that. Another is we are in health care, private healthcare so physician, perhaps management companies going to … I’m working on a post right now with Nikhil Krishnan to articulate what is the value proposition of private equity in PPM specifically, with provider practices, what are the pros and cons around that?

Are there some ways you’ve consciously tried to make it easier for people to reach out to you? If you just follow people and you don’t ever comment or anything like that, then no one finds you, but do try to make a conscious effort to be active enough, that people could stumble across your stuff?

It’s interesting. I mean, you want to build connections through two lines. It’s either there’s a work relationship, or a friend relationship. For Twitter, I think, it lends itself to both. Taylor Pearson, one of my great friends, I met him through Twitter. That snowballed into a network of a whole bunch of other people that are now really good friends. I mean, the easiest way to do is just DM someone. That’s effectively what I do, to the extent I’m enjoying what I’m seeing on their Twitter. I see the conversations that they’re putting forth. If something resonates with me, then I’ll probably proactively reach out.

From an inbound perspective, in my job, I actually did quite a few inbound’s just through our website. Whether that’s a college kid, investment bankers, are probably the two main groups. They’ll obviously see that I went to a non-target school. So, it’s all about finding that commonality, leveraging that commonality, and building a relationship with the person. Obviously, that’s what I did to get into where I am. So, when people reach out to me through my work, email, I respond probably eight, nine out of 10 times.

Persistence pays off too. If you email … I’m probably the type of person that doesn’t … If you email me two or three times, that’s better than one time. In that, one, it shows me that you actually care. You’re not just sending a blast email to 20 private equity funds trying to find a job, or maybe you are, but you’re at least hustling. That persistence also lends itself to seeing success.

Then my website, again, I probably have a 100 people that are on the mailing list. I haven’t written on it in over a year now, but people still sign up. I have some conversations through that as well, because that’s probably the best path in that Twitter is very hard to communicate a very valid point. It lends itself to sound bites, and not fully developed thoughts. So, if someone reads some of my stuff and that resonates with them and they sign up, that is a higher, what I’ll say, conversion rate of a better conversation, probably.

How are the quality of conversations with people who are on your mailing list versus people you reach out to via Twitter, or other means?

Yeah, probably a little bit better on the mailing list. There’s this one guy, he was at KKR, which is a massive private equity fund in London. He was there for four years. Now, he’s got a public equity fund. I’ve had a lot of great conversations over email. That’s why I encourage it. David Perell, he’s a good friend of mine. His writing class, what he’s doing, I think is fantastic and should be leveraged by anyone that’s aspiring to build a network and break into an industry that’s hard to break into, is that the best way to meet people that you want to meet is by saying, “This is how I think, how can you improve? How can someone come in and be like, yeah, that’s wrong? Yeah. I kind of agree with that.”

Building that conversation, having that conversation is really only possible when you have a more longer form written topic, I find at least. I honestly still do that through Twitter and such. I haven’t reached out a ton through Twitter. I don’t use Twitter … I didn’t use Twitter to find of the job I’m in now, and I certainly don’t use it now to network within private equity. Otherwise, I wouldn’t be anonymous. I don’t use Twitter at all professionally. I’m more of just looking for what do I find curious, or what do I find interesting?

It’s less scripted and programmatic. Whereas, when I was recruiting for both PE and investment banking, when I was in college, I would troll LinkedIn, try to find emails for these individuals, find the email, kind of syntax, and then figure out … Obviously, their names are on LinkedIn. Plug in the syntax with their name and shoot them notes, or cold call based on commonalities of individuals. That is a much different task than just writing whatever I want on Twitter, and throwing stuff around.

Do you think that if you had used Twitter and then written more in school, do you think that would have helped you in getting to banking and private equity?

Essentially, I would think so, but still there’s a dearth of investment bankers and private equity professionals that are public with their content. So, said differently, you look at VC kind of Twitter, and it’s a very robust and developed ecosystem. That ecosystem, because it’s developed, lends itself to, if you join it then you can take advantage of it. Within private equity, within investment banking there is no ecosystem on Twitter, and therefore if you build and create within no ecosystem you’re not going to get as much benefit.

There is obviously a “FinTwit”, which is really more public markets based, and even within it probably lends itself to small caps and micro caps, individual investors, people that are … You don’t see, at least not anonymously, guys working at Glenview, or Citadel, or Millennium. Those are all very big hedge funds. It would have been better, because it would have been another avenue for me to meet people, but I’m actually probably a little bit skeptical of how successful someone breaks into investment banking via using Twitter.

Whereas I think the immediate reaction is FinTwit’s massive, you should easily be able to get into investment banking. I think, that would be my initial reaction, but when I think about it more, I think it’s a little bit harder than what it seems, just because there isn’t a developed ecosystem within private equity or investment banking, really.

How is having your non-target background, where you had to grind your way to where you are, how has that given you a different perspective versus those who went to target schools and maybe had a little bit easier time in the recruiting and networking process?

Yeah. So, four of the guys I work with have Harvard MBAs. I would say it just meant that I had to work harder. Once you get into investment banking, your work product starts to stand on itself. So, I haven’t been one to ride that chip on my shoulder saying, “Oh, I came from a little background and had to work harder,” because I really think once you get into investment banking, you’re at a fairly level playing field. You don’t get a higher bonus, because you went to Northwestern or University of Chicago undergrad, versus my school. You get a higher bonus, because of the work product you put forth is really good.

Once it became clear that it’s somewhat of a meritocracy, of course it’s not perfect, PE is the same, but once the realization that, yeah we do live in a meritocracy based system, the whole school thing, I didn’t really care. It certainly doesn’t bother me, and isn’t something that I’m like, “Oh, I have a chip on my shoulder,” so to speak. What it did do was, one, allow me to create a pretty big network while I was in college. It forced me to. Forced me to develop those skills, and also forced me to be more conscious with building a network, and building a portfolio of, this is how I think this is who I am, so that I could ultimately leverage that in my future career.

I don’t have an MBA. I’m not going to get an MBA, and so how do I supplement my lack of credentials for … How do I supplement that? The other thing is, the way I think about it credentials … A brand is only valuable to the extent the individual across the table doesn’t know you intimately. What I mean by that is, and again it goes back to this meritocracy based thinking, is if someone can do XYZ at a 100%, and this person didn’t do it at 90% nothing else matters, if what you’re solving for is doing that XYZ thing. All that matters is the person that does it a 100% versus 90% ultimately is the better person for the job.

So, if I can convey that I’m a 100% on this one task, without having to show that I went to Harvard, I may be more successful theoretically, because all a brand does is say, “Hey, this person went to Harvard. Therefore, one it’s an incredibly hard institution to get to. That alone is a massive filter that this guy is probably good. Number two, it means that the coursework and the school itself is hard.” Those are two very good filters that the rational thing to do is to say, all else equal, a person that went to this school that’s crappy versus Harvard, the Harvard person, all else equal again is better.

If I can eliminate and just show that you don’t need to substitute brands and filters. Look at what exactly I can do, and judge me based on exactly what I can do, and after I put that forth in the world, you can have a higher success rate and mitigate my lack of branding, my lack of prestige. That’s how I approach that generally. Again, I would say it’s irrational to not use these filters in life. So, the person that went to a better school, if I know nothing about them versus a person that went to a crappy school, if I know nothing about them, the person that went to a better school, I would pick that person, even though I have a crappy background.

Again, there’s, there’s a lot of data points that you feed into that, but as a heuristic, it is valid still.

Any particular reason you don’t want to get an MBA?

Yeah. One, I don’t like people telling me what I can and can’t learn. Pretty averse to the cost itself. With opportunity costs factored in, it’s close to probably a million dollars. Don’t like people telling me what to do. Two, the two biggest things you get from it are a network and an education. A network, again, trying to supplement that through conversations like these, which get disseminated, my website and being just more out there. That’s how hopefully you solve for the network a little bit there.

Then on the education front, one, I’m just naturally intellectually curious, and so feel very comfortable that anything taught in MBA school I can either learn on my own or learn something that I find even more interesting than a case study on a private equity backed company, because that’s what I do day to day.

So, there’s something that you’re building towards or looking to do next.

Yeah. That’s a good question. I mean, it’s still fluid. I’m still learning. I’m still learning in my current position and job. I don’t know what is next actually. There’s a partnership track in my current fund that is attractive. Of course, there is the concept of golden handcuffs is very real. As you continue on this career path, it gets harder and harder to do your own thing, just because of the opportunity costs.

Within private equity, there’s a few things within a deal. So, there’s the valuation of a company, there’s execution of a company. By execution, I mean, again, law firms, accountants, consultants, bringing in the deal together, so to speak. Then there’s post-close management and operations and improvement. Of those three pillars, the first one is what I enjoy the most. So, what I mean by that is what I really enjoy is saying, “I like this industry, and I like this company at what price is this an attractive investment?” That’s probably what I enjoy the most, which is only probably 10% of private equity.

The rest that it is executing on the deal, and then maybe it’s 15 to 20%, but there’s a lot of other stuff that you’re doing, which I like and enjoy, but I don’t love relative to the former aspect. I think, what lends itself to the former is probably public equity investing, but one obviously public equities, or active management of hedge funds aren’t killing it and probably pretty picky around the seed itself, and what that would look like. So, what I mean by that is if you go to Citadel, or Millennium, or one of the big top forms, the velocity of transactions, they’re trading quarterly on earnings, you’re given 40 names within an industry, and that’s how you develop there. At least that’s my understanding.

What is more interesting to me is doing, and again it’s cliché now, but private equity investing within the public markets. So, eight to 12 highly concentrated positions where you know everything about them. That is attractive to me. I don’t know if I would ever go to another firm to do that, but maybe within five, seven, eight, 10 years, potentially start my own fund that did that. That’s one potential career path.

Another career path is, through networking, have a lot of older folks in industry that I know within private equity, not that much older, but to the extent they spin off and do a two to three person shop, raise a 100, $150 million, a about a billion under management now. There’s 11 of us, but potentially going to somewhere where I’m the third guy. That could be attractive, obviously at a much smaller scale.

Then the last one is just staying in my current gig, which I really do enjoy like all the here. Those are the three routes I potentially see for myself as of now.

With the second idea of going to be the second or third guy at a new fund. Is this something you would prefer to join rather than start yourself?

No, I would like to start it. The problem is, within private equity, it’s much different than a hedge fund where like today I could probably start a hedge fund, use my own capital. I could probably raise a million, 2 million, maybe $3 million just through friends and family, and you could theoretically have a hedge fund. Within private equity, you probably need 50 to 75 million to even start, to even get off the ground running.

So, I have no ability to do that. I don’t have LP relationships. One, I wouldn’t be able to bring the capital to bear. That’s probably the most important aspect. As a third person, you’re still an employee, you’re not a founder. What differentiates it is when you start controlling the relationship with the pension fund, the endowment, individuals that ultimately give the private equity fund cash, that’s a pretty big dividing line, between if you control those relationships, then you can do your own thing. If you don’t, it’s harder to do your own thing.

I wouldn’t be able to start my own fund. As much as I think I’m awesome at my job, I wouldn’t be able to do my own fun for a while.

Does the search fund world interest you either as an investor or searcher?

As an investor, yes. As a searcher, no. One it’s super highly concentrated. My understanding of a search fund … People’s definitions vary, but the couple of people that I know who’ve done it, and I’ve also looked at deals for the search fund business. Basically, you get a few people that say, “Yeah, I’ll invest my, if you find a company that you like, and that you ultimately run.” That individual does that. Looks for a company for 18 months, ultimately pulls the trigger, and as you get closer to that 18 month mark probably the quality of the asset that they’re going to buy decreases, just purely because just the way the incentives work out they have it at the money out.

The bigger thing why I personally wouldn’t do it is one of your just tying yourself up into one company. So, from a risk diversification aspect, it is a lot riskier. That’s one part. Not a huge part. The other part is I just don’t love operating. I wouldn’t want to be a CEO of a company. It’s incredibly hard. I’ve worked with CEOs and CFOs every day. That is too much work for me. I’m probably just too lazy for that.

At this point I doubt you’re the lazy one here in the equation, but you could invest in searchers though, and then broaden your capital that way. Then you wouldn’t have to be the operator.

Yeah. From an investment standpoint I think it is interesting. It’s an interesting asset class. I have one friend that is doing it. I hadn’t put money in to it, but you’re kind of backing the individual. So, you’re backing the individual’s ability to evaluate investments, which is fundamentally different than backing and evaluating the business itself. So, all of my learning and training, so to speak, has been about business evaluation, which is very different than allocator evaluation.

So, there are professionals that do allocator evaluation, or an investor evaluation that I wouldn’t even know where to begin. Obviously, I can look at myself and be like, “I think I’m a good investor. Here are the traits of myself, does that person have it?” That’s what you can do a little bit, but yeah it’s a completely different type of investing that I’m doing now, which is do I like that business? If so, why? What price can I pay for it? Do I think this person will evaluate businesses in such a way that he’ll buy a good business, and are the incentives in place such that he will ultimately buy a business, because it’s a good business and not because he has to put the capital to work?

What about the public equity side? I mean, that has a lot more of the transactional part. Do you think you would enjoy that?

What do you mean by the transactional part?

Well, it’s more, you’re not the operator. You can evaluate the businesses.

Yeah, and that’s what’s attracting me the public markets is that it’s very easy. Here the industry does stock trades in, and here’s the company itself represented by the stock, and here’s the price that it’s currently trading for. Is this an attractive investment at that price? You answer those three fundamental questions, which are incredibly hard to answer, then you just press a button and you buy. That is very attractive to me, and something that is interesting to me.

Active management has obviously trended downwards a ton. So, just the number of seats open to that, and again there’s a big difference between having eight to 10 positions and doing a 20 page report on those, versus having 50, or a hundred, or working for a mutual fund, so to speak. So, there’s just really not a ton of seats and opportunities to do that. Again, it’s also weighed against … Obviously, right now I’m paid pretty well, and so I have a pretty good spot right now. So, it’s balancing those two things.

Do you think though, that your Twitter presence and mailing list, or just being more active, would benefit the public equity career path more so than say the search fund, or even continuing on your own path at this point? If you wanted to do the public equities, like the work you’ve already put together so far would probably be the most helpful to that.

Yeah, I agree. Yes. That’s also partially the impetus of the website and my presence as well, is that when I was leaving my prior private equity fund, I did try to get into public equities. Interviewed at Glenview, which was interesting. They made me take a two hour brain teaser test. This goes back to the whole background, the whole, you do have a little bit of a … You are on a lower pedestal if you have not a great background.

So, I do the brain teaser tests. I leave the interview. I called the head hunter. I’m like, “Yeah, I thought it went pretty well. I thought I did well.” She was like, “Okay, oh I just got an email from Glenview. The HR person at Glenview.” She said, “Let me just read it to you.” She’s like, “Wow, to my surprise, Clearing Fog, did really well on this. We’d like to have him in again.” If I had gone to Harvard or something, I don’t think she would have been like to my surprise. The sentence would have been prefaced with, “Holy crap, this kid actually did know what he was doing, or was smart.” That’s just more of an aside, and that I thought was interesting.

So, that still comes into play, but not a ton. I did try to get into public equities, and again firms like Glenview, that didn’t work out. Ultimately, got a great spot where I’m at now, but still have the website and have that avenue to potentially pursue. It’s all about creating that optionality. So, I think that’s what the website and writing does, is it creates those options, and it connects me with people that think similarly. Even better than thinking similarly are ones that disagree with you constructively in that they say, “Yeah, this was asinine. This is what you should be thinking.” It’s like, “Oh, yeah. Wow. That was smart.”

Yeah, to your original question, the website definitely lends itself more to public equities career pathway.

How do you think you would apply your private equity training to public equities if you were to have your own fund?

The depth of research that you do within private equity is unparalleled. That’s primarily because of the access to information that you have. I’m not saying that private equity guys put the companies in greater depth, because they’re ‘smarter’ or ‘that’s what they do’. It’s purely because of the access to information that they have. So, because of that one, you’re seeing companies at a level that a public equity investor just doesn’t have access to. That’s one.

Two, you’re training yourself in such a way that you understand nuances of companies that public investors also don’t know. So, in taking that depth and taking that lens, and to the public markets it’s actually sometimes challenging for me in cases of, “Oh, I don’t have every single customer, every single skew sold into to that customer, and the gross profit on every skew, sold within that customer.” That’s the level of data that you’re dealing with within the private equity world, that you’ll never get access to in the public markets.

If you understand … The way I approach private equity is, and this is what I tell my associates, is that if you had perfect information, if you could get any information in the world that you wanted, it doesn’t matter it was perfectly expressed to you, what would you want? What would you need to better understand this business? Use that lens and then say, “This is the customer data that I need in order to ensure that five years from now, it’s going to produce this cash flow.”

If you understand, within the realm of possibility of what perfect information you can have, you can then use that and start scaling it back towards, this is what is acceptable within private equity, and then this is what is acceptable within public markets. I think the depth and breadth of information that you consume and understand at the industry and company level, I think prepares you very well to analyze companies within the public markets. What it doesn’t prepare you for are probably the emotional aspects of seeing the daily stock prices.

Do you invest public equities on the side, or are you not allowed to, from your firm?

I’m allowed to. I don’t a ton, primarily because the threshold of work that I personally require to invest in an individual name is too much in terms of … In order for me to be comfortable that at this price that could makes sense, and this is a range of values that I think is a fair market value, the work required for me to get that thesis created is tough. I don’t have a ton of time to do that.

I will say with COVID and the gyrations in the market, I have invested part of it within individual names that I’ve found that … Again, when prices are depressed, the amount of work and the margin of safety that you need to have around a name is a whole lot less. So, everything’s trading at 15, 20 times easy to EBITDA, I better know that thing cold. Know that, one, that’s a rational multiple, it’s going to maintain the same and earnings will increase. If that’s the market you’re in, it takes a lot more work.

If that same thing is trading at eight times, seven times, because of a shock to the system that you think is somewhat temporary, the amount of work and margin of safety needed around that is a whole lot less. So, from a personal portfolio perspective in the last two and a half, three weeks, I have invested a fair amount in individual names, but again that’s purely, because I think their market was a little dislocated, and it makes it easier when prices are a lot lower.

What class would you teach in college? If it could be any subject you wanted and you could design the course how you liked?

Yeah, that’s a great question. I would say probably something around complexity science. I talked a lot about in that letter to my younger self about the world is very probabilistic and it’s all about pushing towards a high probability of something occurring. There is no black and white, everything is gray. There are no fundamental truths to the world. So, teaching that and intuiting that at a younger age and certainly within college, I think would be super valuable.

All of that is wrapped up into complexity theory I believe. So, teaching that and creating a course around that, I think would be super interesting, and much more interesting than investing or private equity, for sure.

What’s something you used to believe fairly strongly that you’ve since changed your mind on?

Partially because of that world view around beliefs are always vulnerable. I would say that’s probably something I didn’t believe all the time. So, politicians get ridiculed for flip-flopping, and changing their opinions, and changing their minds around that. I probably held that belief as well, that you should sit to kind of this is a core tenant, or this is what matters.

I’ve probably gone to a complete other style where everything is fluid. You should be incredibly fluid with your thoughts and opinions around everything. So, as things changed, even at a micro level, you should incorporate that into your rationale your thought process, your belief system. What it comes down to is no one knows anything. So, it’s just about collectively creating the best possible decision with new variables and inputs.

I didn’t fully believe that, until the three to five, seven years. Before I was probably more rigid in my thinking, less intellectually flexible, so to speak, and thought that was a good thing and not very bad thing.

What’s the best business you’ve come across?

Yeah. I would say, probably widening the scope of the business, probably the Mormon Church. I don’t have a fantastic business. I’m pretty sure that 10% of people’s savings within the Mormon Church go to the church itself. They’re incentivized have large families so the growth rate is obviously solid.

Probably a little controversial, but yeah, religion in and of itself is … If you classify that as a business, you go to Christianity, or Buddhism … Buddhism is less centralized around probably one church. I would say there are pockets within religion that are incredible businesses and have stood the test of time, but corollary to that, it was probably government. If you look at the UK as a business, that country has been around for awhile.

Those would probably be two top avenues I would pursue if you’re saying the best business in the world. The US government, probably the best business, right? It’s a risk free rate.

Thanks for coming on. It was fun to hear from an anonymous Twitter account and just learn a little bit more about you, and thanks for coming on. Really enjoyed it.

Yeah. Thank you. Appreciate it.

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Clearing Fog

My guest on this episode is an anonymous Twitter user under the pseudonym Clearing Fog. We talk about his career in investment banking and private equity, why he writes anonymously, and what he’s thinking about next.

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