My guest on this episode is Mark Brooks, Managing Director of Permanent Equity. Mark leads Permanent Equity’s post-close operations team, partnering with company leaders to overcome challenges and unlock growth.
Mark is a really reflective person, which you can tell from his writing on Twitter. He’s thought very deeply about management and creating transformative teams, and this conversation is dense with value and insights. This episode is a fantastic dive into all things management, including brevity and effective communication, creating an environment that encourages debate and disagreement, and why great teams are crucial to combat process depreciation.
Live Oak Bank — Live Oak Bank is a seasoned SMB lender providing SBA and conventional financing for search funds, independent sponsors, private equity firms, and individuals looking to acquire lower middle-market companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to www.liveoakbank.com/think.
Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected].
Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.
(2:58) – How important is brevity internally in business?
(8:17) – When you think about writing key messages, how would you coach communicating via email?
(10:10) – How do you share ideas across companies?
(13:10) – How do you make sure your companies aren’t reliant on one person?
(17:13) – Is there a long term goal that operators should aim for in terms of the decisions they have to make?
(19:37) – Healthy laziness in delegation
(23:14) – How do you best shift the mindset of a new manager to think more about team performance vs. their individual performance?
(26:40) – What are some common character traits of leaders who are great delegators?
(28:23) – Building a team for space and for stress
(31:45) – How do you evaluate a candidate’s ability to build a team?
(33:26) – When you bring in new managers, are there common behaviors or patterns that need to be adjusted?
(35:59) – The depreciation of processes
(38:38) – How do you create a culture where employees feel comfortable disagreeing with management?
(41:48) – How do you try to pinpoint holes in your own processes and methods?
(44:34) – Of the highest performing operators you’ve seen, are there any consistencies in their daily routines?
(47:55) – What’s a strongly held belief you’ve changed your mind on?
(50:25) – What’s the best business you’ve ever seen?
(52:10) – Which newsletter writers do you really admire?
Alex Bridgeman: I think a fun place to start would be something we were just discussing which is the focus of writing or brevity in particular, like writing briefly. And Axios today just announced selling to Cox Enterprises for half a billion dollars. And there’s some talk that the CEO, one of the co-founders, had given talking about how important brevity was and that he was describing writing this big story on the president and tons of people were reading it, but it was one of those days where each of the paper- you had to flip to the next page. You had to like click to next page, almost like a slideshow. And he’s found that almost nobody even went to the second page. And he very quickly found out he had to be very brief in his writing. And we were just talking about that in terms of Twitter. But I imagine brevity applies all over the place beyond just public writing, but also internal writing, communications with management teams or employees or hiring strategy. There’re tons of value in brevity. I’d love to hear kind of what’s been your thinking on brevity within and internally in a company?
Mark Brooks: Yeah, sure. We were talking earlier about Twitter and the forcing function that it has for you to clarify what it is you’re thinking. And I started, I haven’t been that prolific in earlier years, but I started in 140 character days when it was actually a real challenge to put together a legitimate thought in 140 characters, especially one with any sort of depth to it. So, 280 characters now feels like a total luxury. I don’t really write on any other platforms, I think because I miss the forcing function. And I really need it as a discipline to clarify what it is I’m actually trying to say. So, I often start with something that’s way beyond the 280 character limit and just keep editing down, editing down, editing down. Something I learned from Morgan Housel years ago is that editing process is really kind of distilling what it is that you want to say to people. And so, to your question about the importance of it internally, I probably, as a manager, spend more time editing emails than maybe anyone else I know. And I think the reason is those emails, those recorded conversations with the folks on your team, in some sense, become kind of the backbone of what people believe about what you’re saying or believe about your company. And we talked also earlier about how content that you produce, whether it’s for a broader network or for internally, kind of becomes the constitution of who you are as an organization. I may be overthinking it, and I’m open to hearing that from people. But I think it’s really important to be careful with the words that you say to people. And brevity is a big part of that. The more you go on bloviating about a certain point in an email or a Slack or something like that, the message gets muddled. And so, as few words as possible where you can still capture the concept that you’re trying to communicate to people is a great skill. And you can tell a big difference between a writer who knows how to be brief and a writer who doesn’t. And there’s definitely a place in prose and in fiction for that sort of writing, like those books and articles and essays that really capture us. In business, I find that brevity tends to be more powerful. And so that forcing function of sitting down and thinking through, okay, how do I want to say this, and even bouncing it off a couple folks who are going to be recipients of the email before you send it out. I mean, I really feel like I obsess over internal communication. And I think it pays off because I do think those communications are extremely powerful. People can save them literally for forever. And so, the way that you communicate those things, especially around key lifetime moments inside the business, so something bad has happened, something great has happened, you feel like a new policy needs to be rolled out, the way that you talk about that with people, they’re going to remember clips and phrases of what you say literally for forever. And especially in those key cathartic moments in the life of a business, those things are going to be impermeably etched on people’s brains. And so being extremely careful about the things that you say and the brevity with which you say them, which again crystallizes the core of what you’re trying to communicate is really powerful. And to make the point, I just spoke way too long on the point of brevity. But that’s what you’re going to get from me in audio instead of writing. I think that’s the other crazy thing – I talk way too much as a person. And so, the way that I express myself in writing is kind of the antithesis of how I express myself in talking. I do a lot of reiterating and that sort of thing. And so, I have this dual personality between who I am in person and in conversation and who I am as a writer.
Alex Bridgeman: Do you have a Slack channel just devoted to email drafts and you’re like, hey, what do you guys think of this, like pasting the email and then let everyone else paste there and share thoughts?
Mark Brooks: Topically, yes, definitely. I mean, we manage twelve different businesses now plus the firm itself is a thirteenth. So inside each of those channels, we have lots of conversation about especially those broader communications. Things that are going to more than three to five people, we do lots of workshopping inside of Slack.
Alex Bridgeman: And when you think of writing key messages, or we’ll take an email as an example, and maybe we can take it as a management perspective, like how would you coach CEOs or COOs who are working for you or working in one of your companies, how do you coach communicating through emails in terms of brevity and word choice and appropriate length and phrasing and all these other things?
Mark Brooks: Yeah, I think I do more coaching around empathy than anything. What I don’t want to do is force my style on other people. So, if a CEO is putting something out and I’ve edited it to be 50% shorter than it would have been if it came in their voice, employees are going to be able to tell. So, I try really hard not to tamper with voice or with length when folks are running something by me. But what I will give feedback on is empathy, either over empathizing with a certain set of stakeholders that are receiving the communication or underrepresentation of another set of stakeholders. And it’s more difficult for folks who haven’t sat in the shoes of the recipients of the email. So, you bring someone in as a more experienced manager who’s never had a blue collar job or never worked in a restaurant, that sort of a thing, that’s a challenge to be able to speak to that to that level. So that’s where I tend to weigh in more on – hey, are you considering this audience? Or someone who is living paycheck to paycheck, how are they going to read this email? Or you’re speaking really well to the paycheck to paycheck folks, how’s your management team going to read this? So, it’s a difficult balance. And sometimes you do have to be a little bit more verbose to make sure that you’re checking all the boxes in terms of the stakeholders that you’re messaging. But I would say that’s where I put most of my emphasis is making sure that you’re being empathetic and considering whose shoes am I speaking to in this message?
Alex Bridgeman: One thing we’re also talking about in terms of content as well was how are you sharing ideas across companies, and we talked about kind of Notion and some of the other tools that are used in doing that. But how does, just kind of continuing this thread of communication and brevity to some extent, how do you share ideas and get information across companies to each other? That seems like it would be an exponentially more difficult challenge over time as you grow and add companies. But what are some ways that you’ve solved some of that?
Mark Brooks: Yeah, well, I wouldn’t say that we’ve solved any of it, but I can talk to you about how we’re trying to solve it. I mean, we do use Slack a good bit, which for real time conversation is great. We also have a pretty strong bias to in-person work. So, there are a lot of serendipitous conversations that happen. We have a room that all the ops, the post-close ops team sits in. So, we do have lots of just over the shoulder chit chat where things get shared. But I would say Slack is the next level where, hey, we need to write this down to make sure that we don’t forget it. And then Notion is where we really want to crystallize things for the long term. So, what is the strategic decision that we made about this business’s product portfolio? Or why did we choose to hire this candidate to head up marketing versus this other candidate? And sharing our notes there. I think the reason being we have such a long-time horizon at Permanent Equity that none of us, realistically- so, I’m in my mid-40s, and I would love to think that I’m still doing this when I’m 75 at the end of our latest fund, but that’s a really long time to think about. So, we almost come to these conversations with a bias towards needing to document things for whoever the next generation is that picks up the mantle of Permanent Equity. I mean, we want to be doing this generationally. And so those key, we talked about inflection points earlier in terms of communication, those also need to be crystallized in some sense of this is the decision that we made. Why did we make that decision? So, I mean, the first item on each of our businesses’ Notion pages is the investment memo. So, the thing that we shared internally on why we loved this business and why we wanted to partner with them for the next 30 years is the first thing because it is, it serves as sort of that constitution of this is why we love this business. And it’s great, especially for businesses that we’ve owned for a few years, to go back and remember, oh yes, this is the unique genius of their business proposition and to reengage with that, and it is reinvigorating to kind of go back, like a stock investor going back and reading their journal when they’re trying to make a decision, that’s what Notion really serves as, as our kind of real time journal of why did we make these core decisions and going back and revisiting them frequently is a healthy practice, but also one that can be exciting and reinvigorating.
Alex Bridgeman: In the purpose of brevity, there’s another topic kind of tangential to this I want to dive into, which is concept you’ve written about recently, which is owner reliance within businesses. So, a company that’s over reliant on a business owner, but ideally over time, there should be some more separation from that owner in terms of the ability to transfer the business to other folks. But the article you wrote recently, the Kingdom or the Crown, was written kind of with the perspective of talking towards owners of businesses who might be looking to sell one day, but I can’t imagine that that process of transferability stops once they become a Permanent Equity company. There still has to be value in being less owner dependent or CEO dependent or operator, whatever, within Permanent Equity. How do you kind of continue that philosophy of making sure your companies aren’t still reliant on one person?
Mark Brooks: Yeah, I think growth is a forcing function on that. So, you can be the founder and progenitor of a business, and that’s fantastic. You can also very quickly become a lid on the business. And that’s kind of how we talk about new partner companies that we’re coming into work with is are there lids on the business that we can be helpful with? And owner reliance is one of those lids. And it’s never because the founder isn’t smart enough or isn’t willing to devote enough time or anything like that. It really has to do with as you grow as a business, even if the business is growing linearly, the amount of decisions that need to be made is growing exponentially. So underneath a linear growth trajectory, once you get beyond a certain point, there’s really an exponential growth in terms of number of decisions. And it gets to a point where those decisions get blocked if there’s one person that has to be making all of those decisions. So, we think a lot about decision rights and how those are structured. And we talk, we have very clear conversations when we’re starting up a partnership with a business owner of who gets to decide things when, and our preference is to put as much as possible in terms of decision rights on the business and really only weigh in at key points. So, like, hey, every op X or every capex decision under $250,000 you get to continue to make; we only need to be consulted over this particular level. So, we think a lot about decision rights. And I think growth has a forcing function of pushing those decision rights down into the business, which means that you’re hiring, it’s a forcing function for your hiring. You have to be better and better at hiring because of the level of trust that you have to have with the second layer of the business and the third layer of the business has to increase because you’re delegating. I mean, really, you’re ideally, two to three levels down, delegating decisions that the CEO was literally making a few months ago. So, I wouldn’t say that we have a really honed discipline around this. But I think that growth itself forces you to make those decisions about where decisions are being made and pushing those down in the organization. Brent asked me earlier, we’re having a conversation for a different podcast, and he said, “What’s the advice that you would give an owner who’s two, three, maybe five years out from thinking about taking on partnership in their business or selling their business?” And that was the advice I gave, I cited the Kingdom and the Crown article, which by the way, I was not the primary writer on in any way, shape, or form. Everything’s a team effort here. But I think it turned out fantastic. And that’s the main advice I would give as we look at both from an investing standpoint and from an operational post close operations standpoint, that owner reliance is a huge piece for us. And if someone has demonstrated that they’re willing to be more open handed with the decision-making structure at their business, that is a huge plus for us as we approach a potential investment.
Alex Bridgeman: Is there some long-term goal in terms of like the list of decisions that an operator should be responsible for as the company grows? Like 10 years out, you should only be thinking about these key types of decisions, or at least on any other topic, you’re making this high level of decision. I think of like the- have you seen Margin Call where there’s the meeting in New York and the CEO of the bank is saying, treat me like a- or talk to me like a five-year-old or a golden retriever, perhaps. And it’s not brains that got me here. He’s making very different decisions than any of the other characters in that conference room are. So, what do you think of as the long term north star for kind of the key decisions that operators should eventually only be making for their business?
Mark Brooks: I would say that it’s not super well defined for us. We tend to stay away from like 90 day plans, two to three year plans, that sort of thing. And that’s another concept that’s part of our constitution or our foundations that we’re talking about is the concept of growth without goals. So, we want to be encouraging good day to day decisions but not because we’ve got some artificial three year time horizon that we’re trying to meet. I would say, generally speaking, though, off the cuff, founders should only be involved in day-to-day decision making on the company if they have a very particular expertise that’s industry specific, product specific, customer specific. And even then, that should be kind of a warning sign in the back of their head of, okay, I need to teach someone else how to do this. So ideally, if we’re thinking categorically about the types of decisions they should be making, if people are coming to them with decisions on how do we make this decision with this customer, or how do we make this decision on this product, things that are required for day-to-day operations of the business, that should be a warning sign. And then maybe you can think about it as time horizon specific. So, if people are coming to you with ideas on what the business needs to do week to week, then that’s the next target for you to relinquish. From month to month after that. And then, ideally, at that CEO founder level, you’re thinking in terms of quarters and years more so than what do we need to do to keep the doors open for tomorrow.
Alex Bridgeman: There’s almost like a- I would never accuse a CEO, any CEO I know of laziness, but there’s almost like a little bit of laziness that’s healthy, where like, I really don’t want to do this or I shouldn’t be doing this. Someone else needs to be doing this. I want to spend my time doing other stuff. How have you seen kind of some of that manifest in your companies or just companies you talk to?
Mark Brooks: I think it’s a big challenge because of the personality type and the drive and the grit that it takes to found a company. Like I could never do it. So, I have a tremendous amount of respect for people that have done that and have pulled it off. That same drive and grit, I have observed, makes it hard to let go of those things. So let me segue just for a minute. So, all of us, I think all of us struggle with this. Because from the day that we are born, we are measured based on our individual performance. That is the way we’re measured. Like even group projects in middle school and high school we all know are BS. It’s based on what your individual capability is and usually the person that’s leading the project. And we’re measured like that in middle school, high school, college, if we go to college, graduate school, same deal, if you have the opportunity to do that. And then usually, your first few jobs in the workforce are not management jobs either. So, you have built at this point a 25 to 30 year ingrained mentality around I am measured on my personal output and my personal performance. So, this is one of the things that if you’re a founder trying to transition decision rights, or if you’re just a person who’s moving from an individual contributor role to a people manager role, this transition, doing it well, is really, really difficult because your whole economy on how you measure your personal value has to flip on its head. You’ve thought about this is the best way to do it, and I’m going to do it, this is the best way to do this, I’m going to do this to an economy that is this is the goal that we need to accomplish, and I need to care less about how we get there at the beginning. I can give feedback on process, but my guidance to people needs to be strong in terms of what I want the outcome to be and less strong in terms of the process to get there, which is completely antithetical to everything that we’ve been given feedback on for those first 25 to 30 years of life. So, take that and then put it on a massive amount of steroids for a founder of a company who has built something on the back of their grit, their ingenuity, their capability. And so, it’s a very rare breed to find founders who have been letting go of those things and especially who have the gut instinct to let go and say this company is more valuable the less and less I am a part of day-to-day decisions. Because that wasn’t how the business started. And that wasn’t how the business started to grow. And that wasn’t how the business continued to grow. But now at a certain point, when it gets to a certain size, you have to start relinquishing those decision rights. And that’s really tough, again, because you’ve lived your entire life and your business has lived its entire life with you and your personal performance being an integral part of the overall success. Sorry, that was long tangent, but I have strong feelings on this.
Alex Bridgeman: That’s great. That’s what I want to hear. One thing you said a while ago was the pinnacle of being a great manager is seeing your team accomplish something great and knowing you had nothing to do with it. I’d love to kind of hear more of when for owners or operators managers who have made that transition from individual contributor to manager of a team, at what point or what helps them the most kind of nudge that thought along where actually my performance now isn’t what I can do but what I can encourage and help others around me? What nudges folks in that direction the most effectively?
Mark Brooks: Well, the most effectively I think is the most unfortunate, and it’s usually stress or burnout or something like that, like when folks have been holding on too tightly to things that they really shouldn’t be dealing with on a day to day basis. It just gets to be too much. And they’ll have a negative reaction to it. Fortunately, some people catch it early enough and start to offload things. But a lot of folks who start small to medium sized businesses haven’t done the management thing before, especially at a larger company. So, it’s a very big mind shift for them. I think for us, it’s finding things that are unthreatening and asking them to give up those things. So, the things that feel less core to who the business is are things that we want them to start offloading first anyway. And a way that we can encourage operators to do that is at the end of each conversation, thinking to themselves first was I needed in this conversation? And then the second step is saying out loud to the person they’ve had the conversation with, did you need me to make this decision? Like, do you really need my input on this? Or did you already know what to do? Or a more maybe a kinder way to ask that question is, how was I helpful to you in this conversation? And then that can start to identify very specific transition points for, well, I didn’t really understand the interplay between this customer and the supplier, or I didn’t really know the history of this product line or something like that. And that can identify very specific points for the owner of, okay, I need to do a better job of giving people the history of this relationship or talking them through my thought process of why we started this product line or the service line, that sort of thing. So, asking that question of, was it necessary to this conversation? And then asking that question to the broader room, like how was I helpful to this, because I really want you all to start making decisions like this without me. And I have heard more than once from CEOs and founders that the aha moment for them on this is walking by a conference room and seeing people in the conference room having what is clearly a good discussion about something and having no idea what it is. That’s the- you walk by, and you kind of see in the window, or if it’s glass and conference room, like so and so and so and so are in there, I wonder what they’re talking about. And then, it’s like this aha moment, like, oh, they had an idea, or they identified a challenge between their departments or whatever their areas of ownership are, and they decided to get in a room and solve it without me. And understanding that that’s a beautiful thing for the growth of the business, that tends to be like a big aha moment for folks.
Alex Bridgeman: So, for the CEOs that handle that really well or manage to build teams around them that make decisions and that they are less and less a part of over time, what are some common character traits for those CEOs and managers?
Mark Brooks: The ones who are exceptional at it have this amazing combination of a very accomplished career or just this thing that they have built literally de novo, but also this humility about their participation in the process. So, just talking out loud, there’s probably a very high correlation between people who are good at delegating things and people who credit luck or providence with their success or at least with a part of their success. So, people who approach things with a with a pride but also with humility about their involvement in the process. The people who are most convinced that they have been the reason for the success of their business and aren’t quick to credit other people with their contributions to the growth of the enterprise, those the ones that have the hardest problem. So, I think it is the biggest correlation from a character trait perspective is humility, or people who approach things with more open hands of, hey, I’m really fortunate to have gotten to participate. And we caught this market at the right time. And we just had some great people on staff. Those are the people who are more likely to delegate. And the folks who are, boy, I’m really glad I came along, or this never would have happened, those are the folks that have the hardest time delegating.
Alex Bridgeman: Building on this topic further, there are folks who found businesses and build a team around them to kind of delegate as the company grows. But there’s a similar kind of path where companies will hire a team and delegate to do those tasks better and to get into a growth mindset. And you tweeted something about building a team for space and for stress. And I think this ties in really well to that. Can you kind of walk through that concept and how it relates to these two kind of different paths of team building?
Mark Brooks: Yeah, I tweeted something earlier about the real innovations come out of either space or pressure, I think is the way I put it. So, space is those folks who have time to walk in the woods and think about the next iteration of their business and what that might be, or stress being there’s some exogenous force that comes in and forces your hand to think about what the next iteration of your business is. So, a key employee leaves or there’s a global pandemic, there’s a massive disruption to the supply chain. So, either space or stress can really drive your thinking around innovation of what the next iteration of your business looks like. And let me rabbit trail real quick on that. That’s important. And I think Bezos really popularized this idea of, I think he calls it like third wave thinking or something like that, where you need to be thinking about how to disrupt your own business because someone else is going to do it if you don’t. And so that level of thinking about your business I believe comes from space or stress. Now the delegation part comes in two different ways. So, in order for you to have space to think about those sorts of things, you can’t be involved in day to day decision making for your business, because your thoughts are going to be crowded out by your to-do list and by how you’re blocking other people in the organization with decisions you need to make, your overly full inbox, that sort of thing. So, on the space side, you need a good team with delegated decision making so that you have the mental capacity and the space to go out and think about what that next iteration is. On the stress side, it’s basically impossible to build a stress-free business. And people probably could have argued about that before COVID. But I now think everyone would agree, there’s no such thing as a stress-free business. Your business is going to go through brutal cycles. They’re going to go through downturns. They’re going to be hit by global pandemics, key employees leaving, that sort of thing. And then you need a team around you because being a CEO or a leader, an operator of some way, is already extremely lonely. And when you have a huge source of stress like that, it gets even lonelier. So having a trusted team around you where you are not the only shoulders that the business is resting on is a huge relief. So helping you bear that weight, but also helping you think about, okay, what are the key decisions that we need to make on this, so having them shoulder some of that burden, both in terms of taking day to day decisions off, that same function on the space side happens on the stress side also, so that you can think clearly about how to operate in the heat of battle.
Alex Bridgeman: And for when you’re looking at hiring a position or hiring a CEO or an operator to come run one of your businesses, how do you evaluate their ability to build teams that allow them space and stress?
Mark Brooks: So, I think a lot of that comes from whether or not they have worked with the same people in multiple places. So, it isn’t a perfect diagnostic because not everyone has the ability to do that. But if operators have stories of I worked with so and so, I hired them to be the Director of Marketing at this firm, and then I hired them again to be the VP of Marketing at this next firm, the fact that someone in a position of decision making authority like that wanted to work with that person again is a huge affirmation for us and something that we look for. So, folks that have cohorts of people that they have carried, especially if they’ve done it across industries, across companies, that’s a very strong tell for us that that person is willing to delegate decision making authority and that they’re just generally a decent person to work with. Because you can’t hire people into leadership positions and not give them decision making authority and have them be excited about working with you again. So, the fact that if people have a cohort, or maybe even just one or two people that they’ve worked with in multiple instances, that’s a key thing for us. And we love to look at references also when folks are able to provide them and ask, especially if we can talk to them and ask questions about how are they to work with as a person is most often just as important as their business acumen.
Alex Bridgeman: And kind of within that, there’s another concept that’s kind of similar to parents in that you want to be better than your parents did. Like you want to do things better in certain ways or continue to do good things that your parents did, and it seems kind of similar with bosses or managers. Like we want to emulate great bosses and avoid behaviors of bad ones. But with each role, like each company or team is going to be different. There’s going to be different behaviors that work better with this team. When you bring in new managers, are there any really common behaviors or patterns that need to be adjusted for certain companies, either because they’re just larger or they work in different industries? What past behaviors that they’re optimizing for do you often have to adjust or shift around a little bit?
Mark Brooks: I would say that the two things that we focus on a great deal are people and problem solving. So, if someone comes in, and we’re interested in having a conversation with them for a leadership role at any of our businesses, if they don’t have a people orientation, we’re not interested. People who talk about headcount more than they talk about individual names, that’s problematic for us. We see businesses as collections of human beings who have distinct gifts, and a big part of our job is to apply those gifts to solving problems inside the business. And so problem solving is the second one. And it’s great if someone has big numbers of growth that they’ve driven in businesses before, but we’re interested a lot in how people triage things. So how do you think about the way that you prioritize one thing over the other? And a lot of it is like very relational interviewing driven. So, tell us about a time where you were forced with two really bad choices, and how did you choose one or the other? So that, people being able to solve problems and able to tell us stories about how they were additive to the process of solving those problems is a big one. And then people orientation is the second. We don’t want people- we’re not interested in people who run businesses through spreadsheets. It’s great for them to understand spreadsheets and to be able to identify leverage points in the business model by looking at financials, that’s awesome. But if they’re not running the business through their people, then that’s a red flag.
Alex Bridgeman: There’s another concept that you’ve brought up before which is the depreciation of processes and that, over time, a process in almost any part of the business will eventually break down as the company grows. The concept you just brought up kind of reminds me of that a little bit where perhaps managers who are really good at listening to their team and building great teams can overcome depreciation of processes? Has that been your experience? Or is that a specific kind of discipline that they need to hone?
Mark Brooks: I think there’s a huge amount of overlap between people who are good delegators and organizations that are good at getting rid of bad process. And the reason for that is there’s the classic Toyota example of the red cord, giving everyone the power of the red cord all the way down to the early hourly worker. Like the hourly worker can shut down the process if they see a quality problem on the Toyota line. And so, there’s this level of empowerment that comes with folks who are good delegators that I think defeats bad process proactively because you’re giving people the right to ask why. Like, why on earth am I doing this? And you can tell the organizations that haven’t delegated any decision-making authority to their frontline folks because you will know bad process as a customer and know that the person on the phone with you or talking to you from the other side of the counter is completely powerless to go around it or to change it or to even suggest change to it. So, I think as customers of businesses, we have this like inherent twitch about bad process. Like we know it when we see it as a customer of a service or a product. And then we don’t really think about implementing that in the organizations that we’re part of. The only way those things get nipped is when the people at the very front of your organization, the customer facing part of your organization, have the power to say, this does not make sense to me, and it does not make sense to our customers, and I think we should stop doing it. And to get back to your question, the operators who have a bend for delegating decision-making authority are going to be the ones who it’s not them, it’s not themselves who’s doing it, they’re delegating the authority to go sniff out bad process. And that’s what’s hugely valuable. And those are the businesses that stay lean and efficient over time. It is the ones who have completely empowered employees to say, this is stupid, I don’t think we should do it anymore. And the ones that are most empowered to say, this is stupid, I’m not doing it anymore. Those are the best.
Alex Bridgeman: How do you create a company that allows that to happen where anyone in the company could stand up and disagree with their manager or a CEO to their face and say, like, your idea or your process sucks or is getting in the way? How do you create an environment where that’s safe and encouraged and productive?
Mark Brooks: So, I think, yeah, for it to be productive, it has to be respectful. So, I gave kind of an over-the-top example there. So, apologies if I created any confusion. But I think one of the things that we have had to learn painfully over time is that a lot of the processes that are built into the organizations that we get to partner with have a great purpose, we’re just not smart enough yet to understand it. So, making sure that you take the time to understand the processes that are already there that may, on the surface, look inefficient, may be there for really good reasons. Maybe they’re OSHA reasons or some other sort of regulation. Maybe it’s because the company had a footfall in the past with a customer, and so they put some process in place to make sure no one crosses that line anymore. So, I think there has to be a level of respect for, if your first thought is maybe there’s a good reason for this, but I’m having trouble seeing it. So, on the folks who are offering the suggestion, making sure that you’re cultivating a culture of respect for the folks that they’re passing the feedback on to. And in the leadership level, going back to what we were talking about earlier, selecting for humility is really critical. Because if people aren’t open to feedback, things are never going to get better. They’re not going to get better. Their teams are not going to get better. The product and service the business is offering is not going to get better. So, making sure that there’s receptivity on the leadership side but that people are being polite and kind in the way that they’re passing on the feedback is the way that happens. So, I don’t think that there’s like a process that’s going to work well across a bunch of different companies. But I think culturally speaking, something that will work across businesses is being respectful in the way that you deliver feedback and making sure as a leader that you’re open to receiving that feedback. And that’s where you can really find the stuff that you want to attack as a business.
Alex Bridgeman: It also would be a good interview question for a potential manager, like, tell me about a time where your idea or project got destroyed by your team. Like it turned out it was a disaster and was not going to be the right direction.
Mark Brooks: Yeah, well, I think I mean, one of the questions that you ask on the podcast is tell me about a time where you’ve changed your mind about something deeply held. If someone can’t answer that question, that’s another red flag. As leaders, we have to be constantly learning, constantly open to the idea that we might be wrong about something. Because otherwise we don’t learn. You and I were talking earlier about most of the best ideas we have are because we crashed and burned so many times doing the opposite. So, if we’re not open to the fact that we might be crashing and burning on something, and a lot of times, it’s our friends and our colleagues around us that are going to give us that feedback, we’re never going to get better.
Alex Bridgeman: How do you encourage that with yourself? How do you kind of self-reflect a little bit and look at your processes or your ideas or things you hold dear and kind of try to cross them off on a somewhat regular basis? How do you kind of do that just for you as a person?
Mark Brooks: I don’t have a process for it. But I feel like I am old enough now or experienced enough now to recognize that when someone is giving me feedback about something, and I am starting to get angry about it, that’s when I need to, before anything comes out, even like a facial expression, I need to timeout and say, okay, why am I why am I reacting to this? Is there a sacred cow at play here that I’m not aware of in my head or in my heart? Like, what is it that I’m reacting to? So, that’s a big one. And then the other is actually things that I get annoyed about in other people in terms of personality or process are usually things that I’m also doing. I didn’t come up with this idea, but like the things that we detest most in other people are the things that we detest most about ourselves. So that’s another thing that I think is a good key reexamination moment is when I’m getting annoyed about something someone is doing, it’s probably because it’s a part of myself that I don’t like, and I need to direct the energy that I’m directing at that person back at myself and self-reflection and trying to fix whatever it is that I’m annoyed about with the other person. So those are the two that I would say.
Alex Bridgeman: Any good examples personally of things you don’t like about yourself that drive you nuts when you see them in other people?
Mark Brooks: Yes, procrastination makes me crazy in other people, and I’m also guilty of it. And I’ve had to try to build processes around it. I think a lot of it is- and I think personality tests are useful. They’re not like the key to understanding everybody. But I’m a Myers Briggs P, and so I like open ended-ness rather than like closed decision making. And so, I will put off decisions until the last possible minute because I want to collect as much information as I can to make a great decision. But for the people that are downstream of that decision, it’s probably maddening. And I know it’s maddening because people who do it to me are maddening. So, I’d say that’s a key one is when I get annoyed at other people’s procrastination, I have to remind myself, okay, first of all, you do this all the time, so you need to chill out. And secondly, the good reasons that I use to excuse myself for procrastination, I’m not being as generous with those other people about why they’re procrastinating. So, I need to be as charitable with other people as I am with myself about those same foibles.
Alex Bridgeman: One thing I’m curious about is of the highest performing managers, CEOs that you’ve seen, are there any consistencies in daily routines or habits? Like a lot of them wake up early or have workout routines or eat well or make time for family or socialize. What kind of routines have you seen, if any, that are consistent across high performing managers?
Mark Brooks: I haven’t really seen any routines necessarily. I think one of the hallmarks is people where business is their vocation and their avocation. And I stole that phrase from my father-in-law who is a lawyer by vocation and a farmer by avocation. So, he goes to work, he’s the small town lawyer, and then at night, he hops on his tractor, and he does things around the property. I think some of the most dialed in business folks tend to work a lot, not necessarily at the expense of family or friends or health, but they do business-y sorts of things in their leisure time also because they love it. I mean, it’s probably one of the nerdiest hobbies ever, but that’s a commonality that I see a lot is when I’m having conversations with some of the folks in our portfolio that I consider the best operators, it’s often about business, not necessarily the business that they’re operating, but it’s like, hey, did you read this article about this? And you’re talking about business models or pricing strategy or product portfolio or whatever it is. I think that’s one of the hallmarks I see. So, it’s not really a process that they follow or habits or anything, but more like a hallmark. And I don’t know if it’s developable or not, but I’m a business nerd. The people that I like working with most are business nerds also. That’s kind of a hallmark that I would say. But I know people who are over the top about their health. I know people who don’t really care. I know people who have a lot of family and spend a lot of time with them. I know people who are very happily single. I haven’t really seen anything specific around habits like that. But just in terms of mindset, the people who geek out about business are the ones that tend to be happiest at work and willing to spend more time on it.
Alex Bridgeman: That’s fantastic. Kind of doubling back to a topic we were on earlier, what’s a strongly held belief you’ve changed your mind on?
Mark Brooks: So I hope it’s okay that this isn’t about business. So, I have four kids. And when my oldest was about to go to kindergarten, we had her registered for public school. And my wife came to me and said, “Hey, what would you think about homeschooling?” And I had a very deeply held belief that this was a terrible idea. Like, we should absolutely not do this. And I think, to be honest, it was my own prejudice based on a very small sample size of homeschooled kids that I had interacted with throughout the years. And by the way, if any of you are watching, I didn’t mean that. It’s not you that I’m talking about. It’s the other ones. So, I think I had preconceived notions about socialization and who’s going to teach your kids about x, y and z, the non-book stuff. And so, I had a very strongly held preconceived notion about this. She said to me, “I hear you. Why don’t you come to this seminar? It’s a couple days, down in Richmond. We’ll go and we’ll just listen to a few speakers.” So, I went. I tried to keep an open mind about what I was going to hear. And I heard a couple of pretty interesting talks. And then the type of homeschooling that she was interested in doing made a lot of sense to me. And so I did some more reading on the particular type that she wanted to do. And by the end of the summer, I was like, alright, let’s give this a shot. I wasn’t completely bought in. And I was like, we’ll do a one-year experiment and see how it goes. And now, I believe very strongly that it is the right decision for our family. It’s definitely not the right decision for everybody. And I think that’s an important thing is to hold ideas like that with open hands. I mean, it’s been great for our family. That daughter who was going into kindergarten is going into high school this year, and she’ll be going to high school outside of the home. So we’ve decided it’s not the perfect long term solution for her forever. So, still thinking about it, again, with open hands. But that was a very strongly held belief that I made a total 180 on with regards to our family.
Alex Bridgeman: Yeah, that’s a big 180. What came of the socialization solution?
Mark Brooks: Yeah. So, the way my wife put it is everyone gets socialized. It’s just a question of who you want socializing them. And so, kids are going to pick up on- they are sponges, right? They’re going to pick up on social cues whatever environment you put them in. So, are they going to learn their social cues from adults? Are they going to learn their social cues from kids? And I think we’ve seen over the years most people are just fine. They’re going to be fine. They’re going to be functioning adults. So, I’m not saying this is like the be all, end all. And again, I didn’t engage in this topic to get preachy about it because I have no intention to preach about it. For our kids, being socialized by adults is great. It just makes them very different at parties. They’re very comfortable having conversations with adults on adult topics because that’s how they’ve been socialized. And they’re a little more awkward with kids. And that’s a tradeoff that we’re happy to make. I think you would say the reverse from kids who have gone to larger schools. So, as with everything, it’s a tradeoff. And that’s what we found on the socialization front.
Alex Bridgeman: That’s great. What’s the best business you’ve ever seen?
Mark Brooks: The best business I’ve ever seen is electronic newsletters. So, it’s anytime you can be in the business of selling ones and zeros, you should absolutely do it. And I think for the most part, especially with all the low code, no code tooling that’s out there now that I didn’t have access to when I got into that business 17, 18 years ago, it’s if you’re passionate about a subject, and you’re a half decent writer, it’s an amazing career opportunity because you can basically do it as a solo operation. And with the platforms out there that enable it now, I think it’s a great opportunity for folks, especially for people who have already identified that people management isn’t really their thing. And they’re not into having big strategy sessions. And they’re not super into putting together quarterly reports and that sort of thing. It really can be a very self-contained career for people. And for folks that do it right, an extremely lucrative one. So, I think the solo content producer, given all the infrastructure that’s out there, is the best business model out there. And I think we’ve seen from businesses – I used to work at The Motley Fool – they’re also extremely scalable businesses as well. So, I think whatever size business you aspire to work in, you’ve got your choice in terms of the electronic newsletters or content provider, that sort of thing. I’m more bearish on the whole influencer thing. So that’s not really what I’m talking about; I think they’re having their moment right now. But for folks that are adding substance to the conversation and are especially wise about a particular subject matter, I think the market for that is going to grow for a very long time.
Alex Bridgeman: Who are some of the newsletter writers from a business perspective that you really admire or study a lot and just try to learn from?
Mark Brooks: So, I had the privilege of working with Morgan, Morgan Household back at the at The Motley Fool. And he’s one that I think is great. And his business is largely content. And I’ve learned a tremendous amount from him and his brevity, to go back to the conversation that kicked us off today. He is able to pack so much into just a few short phrases. And I admire him tremendously for that, and I’ve learned a ton from him. Probably can’t tell from my tweets, but I have learned a lot from him. Ben Thompson is a big one. And I think he’s another generational talent in terms of his ability to take extremely complex and interwoven topics on how the internet works, how the big social companies operate and still it down to where someone like me can understand them. I think that’s extremely valuable. And I think he’s built a really big audience. And again, this is the distinction that I draw between influencers and people who have real substantive value to add to the to the conversation. And I think that’s the great thing about riches and niches. Ben Thompson has found his. His niche just happens to be very, very wide because he’s able to go so deep on things. So, there will be folks like Ben Thompson who have very large audiences. There’re going to be people who have very small audiences as well. But I think the interesting dynamic, and I think part of the reason that we don’t have more folks doing this right now, is content producers and really thoughtful writers don’t really understand how much pricing power they have when they go extremely niche-y. I think they dramatically underestimate the amount that someone is willing to pay for very niche-y content. And I think we would have more folks out there if they realize, oh, my gosh, I can write the things that I want to write about and the things that I’m passionate about. And my audience is only ever going to be like the 1200 people who still operate model train stores in the Midwest, but they’re willing to pay like a few hundred dollars a month to get my newsletter because I’m giving them the latest on what’s going on in auctions on model trains. This completely made up by the way. But that’s just an example of I think we’re just starting to explore what that ecosystem looks at. I think there are thousands of geniuses out there in very niche-y parts of the market who just haven’t thought about the fact that, well, no one would read my newsletter, that’s okay. I think we’re going to get to a place where the tooling and the marketing, the out of the box marketing, is good enough where you can go in and you can write to the same 500 people for the next five years, and you can make a fortune. And I’m, as a fellow content geek, excited to see that happen. And I think the third would be Matt Levine from Bloomberg. He is hilarious. I think he’s a lot like Ben Thompson in his ability to distill things down. I mean, just like mind bogglingly complex financial topics and kind of an explain it like I’m five type of format. And there isn’t one of those that I read that I don’t laugh out loud at some point. So, he’s another generational talent. When he decides to hang it up, I think Wall Street and public equities will be dramatically poorer for it.
Alex Bridgeman: Yeah, he’s one of my favorite writers. I love his ability to take, like you said, a complex topic but also make it really funny. And there’s a casual language to the way he writes, where it’s like you’re at a bar with him and he’s just like telling you over a beverage. He’ll use filler words or some other random kind of back and forth things that you might say to each other, but you wouldn’t write in an email or a newsletter, but he’ll add those.
Mark Brooks: It is a very conversational style and yet doesn’t lose its heft somehow, which is, yeah, it’s very impressive.
Alex Bridgeman: Yeah. Like you don’t lose any trust in him as a source for accurate information because of those filler. It almost like amplifies it.
Mark Brooks: Totally agree.
Alex Bridgeman: Yeah. I absolutely love studying newsletters. This is a fun pastime of mine, speaking back to kind of nerdy hobbies of business owners. But I’d love to keep chatting but we have to head out unfortunately. Thank you so much for coming on the podcast and sharing all things management and hiring and so much more. I’d love to do it again soon.
Mark Brooks: Yeah, really happy to be here. Thanks for having me, Alex.
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