WEBVTT - Martin Franklin on Building Businesses (Podcast) 0:00:02.200 --> 0:00:06.399 This is Masters in Business with Barry Ridholts on Bloomberg 0:00:06.480 --> 0:00:09.720 Radio this weekend on the podcast You guys give me 0:00:09.760 --> 0:00:11.920 grief when I say I have an extra special guest, 0:00:12.039 --> 0:00:16.040 But once again I have an extra special guest. Sir 0:00:16.120 --> 0:00:20.320 Martin Franklin has such a fascinating career. He started out 0:00:20.320 --> 0:00:25.800 working with his father taking apart conglomerates and later decided 0:00:25.840 --> 0:00:30.040 he would rather build companies than disassemble them, and put 0:00:30.040 --> 0:00:33.800 together quite an amazing streak. You might be familiar with 0:00:33.840 --> 0:00:37.400 Benson I Care. The returns on that were one thousand eight. 0:00:38.640 --> 0:00:42.760 He also put together Jardan Corporation, which generated returns of 0:00:42.920 --> 0:00:47.080 over five thousand percent. He's built a number of companies 0:00:47.159 --> 0:00:51.400 and really over the past twenty years turned what was 0:00:51.600 --> 0:00:56.720 known as blank check companies or SPACs into quite a 0:00:56.760 --> 0:01:02.160 respectable way to put patient capital in place to make 0:01:02.800 --> 0:01:07.720 long term acquisitions. Different from private equity, which he describes 0:01:07.800 --> 0:01:12.160 as renting assets. He wants to own assets on behalf 0:01:12.160 --> 0:01:17.119 of himself and his investors. Really just an incredibly fascinating career. 0:01:17.200 --> 0:01:22.040 He's done so many really interesting things and his track 0:01:22.120 --> 0:01:26.360 record is quite astonishing. So, with no further ado, my 0:01:26.520 --> 0:01:31.160 conversation with the founder and CEO of Mariposa Capital. Martin 0:01:31.240 --> 0:01:36.480 Franklin VI is Masters in Business with Barry Ridholtz on 0:01:36.680 --> 0:01:40.600 Boomberg Radio. Our extra special guest this week is Sir 0:01:40.680 --> 0:01:44.679 Martin Franklin. He is the founder and chief executive officer 0:01:44.800 --> 0:01:49.400 of Mariposa Capital. Previously, he was CEO of Jordan Corporation 0:01:50.000 --> 0:01:55.400 Benson I Care. He was named Antigua and Barbudos Special 0:01:55.520 --> 0:01:58.840 Economic Envoy and was knighted as a high degree of 0:01:58.960 --> 0:02:04.160 Night and Cross. Sir Martin Franklin, Welcome, It's bloom book. 0:02:04.280 --> 0:02:06.480 Hi Marry, how are you? Thank you? Pretty good? Pretty good? 0:02:06.600 --> 0:02:10.359 So I wanted to include some of the more eclectic 0:02:10.440 --> 0:02:14.280 things in your background because your career path is is 0:02:14.320 --> 0:02:18.120 a little unusual. When someone asked you what you do 0:02:18.200 --> 0:02:21.080 for a living, how do you answer them? It's never 0:02:21.200 --> 0:02:24.360 very easy. I describe myself as a business builder. You 0:02:24.440 --> 0:02:27.440 can't sit that on your immigration form when they ask 0:02:27.480 --> 0:02:29.960 you to describe your employment. But that's that's kind of 0:02:30.000 --> 0:02:33.120 what I am. A bit of an operator and a 0:02:33.720 --> 0:02:36.480 and an investor. I guess a hybrid. So you began 0:02:36.600 --> 0:02:39.680 working on hostile takeovers at a pretty young age with 0:02:39.800 --> 0:02:44.600 your father. How did that impact your views on finance. 0:02:45.280 --> 0:02:47.839 You know, I think I learned a lot in those 0:02:47.880 --> 0:02:50.040 early years. One of the things I learned with the 0:02:50.120 --> 0:02:53.160 corporate headquarters for a bit of a waste of time 0:02:53.360 --> 0:02:56.919 and money that you hasn't really changed. My father always 0:02:57.000 --> 0:03:00.320 used to say that the quality of a corporation is 0:03:00.360 --> 0:03:05.160 an inverse proportion to its location from its headquarters. In 0:03:05.200 --> 0:03:08.320 other words, the further further away they were from the headquarters, 0:03:08.320 --> 0:03:11.600 the better the business. Often those rules are true, but 0:03:11.680 --> 0:03:13.440 that was probably the biggest thing. I mean, what my 0:03:13.480 --> 0:03:15.959 father and Jimmy Gouldvis did in those days was the 0:03:16.080 --> 0:03:21.639 necessary to deconglomerate the conglomerates of the sixties and seventies 0:03:21.880 --> 0:03:24.440 and certainly served its purpose. One of those conglomerates you 0:03:24.520 --> 0:03:28.800 were appointed CEO of was d R G, and you 0:03:28.840 --> 0:03:32.520 were assigned to break up the conglomerate via asset sales. 0:03:33.240 --> 0:03:36.080 What was that experience like? Highly unusual? I mean, I 0:03:36.120 --> 0:03:38.000 think that was only about twenty four or twenty five 0:03:38.040 --> 0:03:40.760 years old. Probably did more M and A than most 0:03:40.800 --> 0:03:45.200 investment bankers in that in that time, but it really 0:03:45.280 --> 0:03:48.160 was quite an experience. What what we took the headquarters 0:03:48.240 --> 0:03:51.000 from a hundred and ten people down to seven, and 0:03:51.040 --> 0:03:53.840 we had certain businesses within the group didn't even know 0:03:53.880 --> 0:03:57.640 that it has happened. You know, the underlying businesses were 0:03:57.720 --> 0:04:01.120 of varying quality, but there was no doubt that they 0:04:01.120 --> 0:04:03.800 were all very appreciative of being sort of left free 0:04:03.960 --> 0:04:08.520 from the shackles of a fairly poorly run conglomerate. So 0:04:10.120 --> 0:04:14.320 you return to the United States, where the idea was, 0:04:14.520 --> 0:04:18.159 rather than break up companies, you wanted to build something. 0:04:18.320 --> 0:04:20.920 Kind of reminds me of a key plot point from 0:04:20.920 --> 0:04:26.400 the movie Pretty Woman. What what was the motivation of 0:04:26.760 --> 0:04:32.440 um saying let's rather than deconglomerize these mashed up companies, 0:04:32.760 --> 0:04:35.000 let's see what we can build. How did that go? 0:04:35.279 --> 0:04:37.880 You know, I'll tell you I had a very close 0:04:38.000 --> 0:04:40.200 and still have a very close relationship with my father, 0:04:40.279 --> 0:04:43.040 But like any good son, I kind of wanted to 0:04:43.080 --> 0:04:46.360 blaze my own path. And one of the things that 0:04:46.600 --> 0:04:50.120 was very apparent to me was it was much less 0:04:50.120 --> 0:04:53.080 fulfilling to break up a company. And you know, when 0:04:53.080 --> 0:04:55.720 you're building something, everybody is sort of rooting for you. 0:04:56.240 --> 0:04:59.719 The investment community is rooting for you, employees are rooting 0:04:59.800 --> 0:05:03.680 for you, the establishment is rot routing for you. And 0:05:05.000 --> 0:05:07.000 you know, when I started on that path of building 0:05:07.040 --> 0:05:10.120 Benson I Care. It was just all the energy was 0:05:10.160 --> 0:05:13.760 positive energy, and so I found it much more enjoyable. 0:05:14.279 --> 0:05:17.760 And uh, you know, again, I don't know what my 0:05:17.839 --> 0:05:20.600 father did was it was necessary, but it was very 0:05:20.640 --> 0:05:24.400 much anti establishment. It was often hostile, you know, there 0:05:24.480 --> 0:05:26.719 was there were people laid off as a result of 0:05:26.760 --> 0:05:30.080 these things. Whereas when you're building, you know, you tend 0:05:30.120 --> 0:05:34.360 to be employing more. Um, it's a much more positive 0:05:34.440 --> 0:05:37.280 energy experience. So that's what I've been doing ever since. 0:05:37.320 --> 0:05:40.000 So let's talk about Benson I Care for a moment. 0:05:40.760 --> 0:05:43.839 You were the youngest CEO of a company ever listed 0:05:43.880 --> 0:05:47.680 on the ny SC at the time, and subsequently you 0:05:47.800 --> 0:05:53.800 generated returns for your investors. Tell us a little bit 0:05:53.800 --> 0:05:56.960 about Benson I Care. Sure. Well, I really started with 0:05:57.080 --> 0:06:00.680 very little money, and I had made it made some money, 0:06:00.720 --> 0:06:02.320 you know, when I was working with my father. But 0:06:02.440 --> 0:06:07.240 basically it started with my buying eleven optical shops from 0:06:07.279 --> 0:06:11.320 a from a company called Sterling Optical which was going about, 0:06:11.360 --> 0:06:14.400 which was going bankrupt, and I got an SBA loan. 0:06:14.480 --> 0:06:17.240 I think I put up a hundred thousand dollars and 0:06:17.680 --> 0:06:20.120 bought these stores. I think it was the only SBA 0:06:20.240 --> 0:06:23.800 loan that they that that nat West made that year. 0:06:24.240 --> 0:06:25.880 It was, you know, one of those years that was 0:06:25.920 --> 0:06:30.240 a you know, down economy that hadn't made many loans. Anyway, 0:06:30.279 --> 0:06:33.560 we bought that business and sold it it into a 0:06:33.600 --> 0:06:38.000 shell company called Erlick Bober Financial, which was a then 0:06:38.120 --> 0:06:43.200 defunct former municipal bond broker. Stock was thirty eight centser 0:06:43.279 --> 0:06:46.680 share when we were reversed it in. At the same 0:06:46.680 --> 0:06:52.120 time brought a chain of formerly bankrupt stores in Minnesota 0:06:52.240 --> 0:06:55.279 called Benson Optical hence the named Benson I Care and 0:06:55.320 --> 0:07:01.320 they ran dispensaries inside optomologists officers. Anyway, that's how we started. 0:07:01.360 --> 0:07:03.960 We were a bit of spoken mirrors. It gave us 0:07:03.960 --> 0:07:06.400 a business with about fifty million dollars of volume and 0:07:06.520 --> 0:07:09.640 very little in profits, and we were off to the races. 0:07:09.920 --> 0:07:14.800 And long story short, we started buying manufacturers and distributors 0:07:14.800 --> 0:07:17.720 of eyeware. The largest acquisition we made was a company 0:07:17.760 --> 0:07:20.720 called Optical Radiation, which I think we bought in nineteen 0:07:20.920 --> 0:07:24.080 ninety four, which was a home run transaction. We ended 0:07:24.160 --> 0:07:28.200 up owning the largest system of lens processes in the 0:07:28.280 --> 0:07:33.440 United States, you know, optical lab speaking lenses into prescriptions. Anyway, 0:07:33.560 --> 0:07:35.800 we sold the company to Sor, which was the largest 0:07:35.880 --> 0:07:41.000 lens baker in the world, and you know, returned to 0:07:41.080 --> 0:07:43.360 investors to stop one from thy eight cents to nine 0:07:43.400 --> 0:07:49.560 dollars and seventy my memory recalls right. And that was 0:07:49.600 --> 0:07:52.200 my capital base, quite frankly, from which everything else I've 0:07:52.240 --> 0:07:55.280 done was built. So so let's talk about the next 0:07:55.280 --> 0:07:59.080 thing that you built. You end up joining Jordan a 0:07:59.080 --> 0:08:01.840 few years later. That wasn't the initial name, was it? 0:08:02.560 --> 0:08:06.680 And that that company I actually didn't join it. I 0:08:06.720 --> 0:08:10.880 forced myself upon it. I would be more. I bought 0:08:10.960 --> 0:08:14.240 nine point nine percent of a company called Ultrist, which 0:08:14.320 --> 0:08:18.600 was a spinoff from Ball Corporation, and made a takeover 0:08:18.760 --> 0:08:21.640 take private proposal to them, which they rejected. That they 0:08:21.640 --> 0:08:25.040 made another and another, and basically they had made a 0:08:25.840 --> 0:08:28.440 couple of very poor acquisitions and every time their numbers 0:08:28.440 --> 0:08:32.800 came down, I had readjusted my offer, and management continued 0:08:32.880 --> 0:08:36.199 to fight me on it, and in the end they 0:08:36.240 --> 0:08:39.760 held an auction that was the only bidder, and finally 0:08:40.160 --> 0:08:43.640 the board decided to invite me to be a director 0:08:43.679 --> 0:08:47.079 in exchange for stand still. So Ian Askins has been 0:08:47.120 --> 0:08:50.520 my partner in right hand for the last thirty one years. 0:08:51.080 --> 0:08:53.760 He and I went on the board. I went to 0:08:53.800 --> 0:08:57.319 my first board meeting. It was an extraordinary event um 0:08:57.640 --> 0:08:59.760 and at the end of that board meeting, they decided 0:08:59.800 --> 0:09:04.840 to fire the CEO and ninety days later made me 0:09:04.960 --> 0:09:08.440 chairman and chairman CEO and ian vice chairman and CFO. 0:09:09.600 --> 0:09:12.599 And I think split adjusted, the stock was about the 0:09:12.720 --> 0:09:16.800 dollar twenty if I remember rightly, about ten dollars pre split, 0:09:17.240 --> 0:09:19.679 and we built the company from there. It was about 0:09:19.679 --> 0:09:23.920 a hundred and fifty million dollar business with about thirty millions, 0:09:23.960 --> 0:09:25.640 and it was it was one of those stories where 0:09:25.640 --> 0:09:28.679 the board decided to actually invite in a very rare 0:09:28.760 --> 0:09:33.240 story where the board decided to invite in the protagonist 0:09:33.840 --> 0:09:36.080 and actually saw that I had a plan and the 0:09:36.160 --> 0:09:40.520 view and shoreholders were richly rewarded. We we We built 0:09:40.520 --> 0:09:45.920 the company for fifteen years thirty four compound return. Sold 0:09:45.960 --> 0:09:49.280 the company when the stock was about sixty dollars, so 0:09:49.400 --> 0:09:52.560 that's about a five thou percent return. And and just 0:09:52.600 --> 0:09:55.960 to put some flesh on those bones. When you joined, 0:09:55.960 --> 0:09:59.280 it was about three million in revenues. By the time 0:09:59.400 --> 0:10:02.760 newer brand Ends boarded for fifteen billion dollars, you had 0:10:02.840 --> 0:10:06.720 over ten billion dollars in revenue, a hundred and twenty 0:10:06.720 --> 0:10:11.520 global brands, thirty five thousand employees, all of which begs 0:10:11.559 --> 0:10:15.320 the question, how did you manage to scale up from 0:10:15.360 --> 0:10:20.280 what was essentially a faltering company into something so successful 0:10:20.400 --> 0:10:24.720 that rubber Maid How to grab it? It's a great story. 0:10:25.000 --> 0:10:26.719 Some of it was luck is that we actually ended 0:10:26.760 --> 0:10:31.320 up with fifty five thousand employees. It was the biggest 0:10:29.360 --> 0:10:34.679 given we we um. You know, the beginning was it 0:10:34.840 --> 0:10:38.520 was an incredible series of events. The first was one 0:10:38.520 --> 0:10:41.280 of the bad acquisitions they had made at the very beginning, 0:10:41.920 --> 0:10:45.520 and by the way, the company's loans were in the 0:10:45.559 --> 0:10:48.960 red zone, you know, the warning sort of potential default 0:10:49.080 --> 0:10:51.640 zone that Bank of America. It was like one of 0:10:51.640 --> 0:10:53.600 those sort of loans that they were watching out for. 0:10:54.280 --> 0:10:57.679 So the company was really in porchet. But they had 0:10:57.720 --> 0:11:01.359 bought the last acquisition that they made, that very poor acquisition. 0:11:01.440 --> 0:11:04.760 They paid a hundred and fifty eight million dollars if 0:11:04.760 --> 0:11:06.839 I remember correctly, for a company, but they bought it 0:11:06.880 --> 0:11:10.680 as an asset purchase. So when we sold the business 0:11:10.720 --> 0:11:12.960 for twenty four million, the business that they had bought, 0:11:13.040 --> 0:11:16.280 it created a large n o l and we filed 0:11:16.280 --> 0:11:19.400 an accelerated return with the government and got back twenty 0:11:19.440 --> 0:11:22.640 five million dollars of previously paid taxes. And then we 0:11:22.720 --> 0:11:25.960 got a little bit lucky. The Bush had done the 0:11:26.040 --> 0:11:29.760 stimulus Bill and allowed companies to go back a further 0:11:29.840 --> 0:11:33.599 three years to recaptch a previously paid taxes for the 0:11:33.800 --> 0:11:36.920 n OL and got another twenty five million dollars, and 0:11:36.960 --> 0:11:40.800 they gave us enough liquidity to really solve the balance 0:11:40.840 --> 0:11:44.520 sheet issues. Our residual businesses were very profitable, and they 0:11:44.520 --> 0:11:47.240 said about thirty million of the BIDA. And then we 0:11:47.320 --> 0:11:50.640 bought a company called Tillier, which picks the food Saver product, 0:11:51.120 --> 0:11:53.440 and we paid only four times the vi DA for it. 0:11:53.640 --> 0:11:55.679 Everybody thought there was a one trick pony and its 0:11:55.679 --> 0:11:58.800 profits weren't going to be sustainable, and its profits went 0:11:58.840 --> 0:12:03.400 from twenty five million to forty million, so we we 0:12:03.400 --> 0:12:06.280 we had started with an extraordinary base. He was the 0:12:06.280 --> 0:12:09.079 only deal I've ever done that literally doubled earnings to 0:12:09.200 --> 0:12:12.839 share on the day we did it. Obviously, the stock 0:12:12.880 --> 0:12:16.000 performed very well from it, and and that gave us 0:12:16.040 --> 0:12:19.040 the building block on which to build. And I think 0:12:19.040 --> 0:12:21.120 the rest of the story is not so much what 0:12:21.160 --> 0:12:23.280 we did right. But the things we didn't do wrong, 0:12:23.480 --> 0:12:27.160 I mean, we didn't have any real failures. We bought 0:12:27.760 --> 0:12:32.760 good businesses and made them better under the umbrella. We 0:12:32.840 --> 0:12:36.760 never borrowed too much, We used equity, were appropriate and 0:12:36.840 --> 0:12:39.959 sort of navigated that route for fifteen years, stuck to 0:12:40.000 --> 0:12:44.240 our knitting. Quite fascinating. Let's talk a little bit about 0:12:44.360 --> 0:12:49.280 the state of business today and what's driving things. We 0:12:49.440 --> 0:12:54.480 were talking earlier about Jordan being purchased by Newell Brands 0:12:54.520 --> 0:12:58.800 in what was that experience? Like you, You've been through 0:12:58.840 --> 0:13:02.679 a lot of purchases and sales of assets, but this 0:13:02.760 --> 0:13:06.720 was a pretty decent sized transaction. It was about a 0:13:06.720 --> 0:13:09.920 twenty billion dollar growth transaction, fifteen billion on the equity. 0:13:10.920 --> 0:13:13.080 You know. My view, I looked at the sort of 0:13:13.080 --> 0:13:15.400 behaviors of my children and felt that a lot of 0:13:15.440 --> 0:13:19.440 the company, the businesses inside the portfolio, we were becoming 0:13:19.520 --> 0:13:23.760 less relevant to the next generation of behaviors. So I 0:13:23.800 --> 0:13:26.880 felt it was the appropriate time for, you know, as 0:13:27.000 --> 0:13:31.920 to consolidate portfolio with somebody who had a similar portfolio. 0:13:32.080 --> 0:13:35.640 Was giving the businesses combined, you know, greater leverage and 0:13:35.679 --> 0:13:39.840 strength within their sectors. But also the decision was a 0:13:39.840 --> 0:13:42.760 personal one. I felt that we had taken the business 0:13:42.760 --> 0:13:46.600 a very long way, We've generated superb returns and this 0:13:46.720 --> 0:13:49.120 was the right time to move on. I was also 0:13:49.360 --> 0:13:52.280 in the process of building a family office. I had 0:13:52.280 --> 0:13:54.560 a son and they had more children, you know, sort 0:13:54.559 --> 0:13:57.480 of ahead of the oldest son to come and sort 0:13:57.480 --> 0:14:02.240 of join a family office in Alament. And so, you know, 0:14:02.400 --> 0:14:05.160 the coincidence of timing felt that it was the right time. 0:14:05.960 --> 0:14:10.559 I think, with hindsight, you know, probably the right move. Obviously, uh, 0:14:10.640 --> 0:14:14.840 I didn't see COVID nineteen coming or anything like that, 0:14:15.000 --> 0:14:19.400 but definitely, um, you know, was was the right move behindsight. 0:14:19.760 --> 0:14:24.080 So since you mentioned COVID nineteen, you were until recently 0:14:24.080 --> 0:14:29.120 a director of restaurant Brands International. They have such brands 0:14:29.160 --> 0:14:34.160 as Burger King, Popeye's, Chicken Tim Horton's. How has the 0:14:34.240 --> 0:14:38.960 pandemic affected those sort of businesses and what was it 0:14:39.040 --> 0:14:43.200 like during the depth in March and April of the 0:14:43.280 --> 0:14:47.320 lockdown across the US. You know, I think that there 0:14:47.360 --> 0:14:51.360 are retailers, quick service retailers, food companies that have been 0:14:51.680 --> 0:14:58.000 hit differently than others. The retailers like McDonald's and Burger 0:14:58.120 --> 0:15:03.600 King and Popeyes have significant drive through services, have been 0:15:03.720 --> 0:15:09.960 far less damaged than you know, casual dining concepts, where 0:15:10.160 --> 0:15:13.760 you know you're sitting inside a restaurant and delivery or 0:15:13.880 --> 0:15:17.560 drive through is a fastballer proportion of the business. So 0:15:17.840 --> 0:15:21.680 I would tell you that they've managed through this admirably, 0:15:22.080 --> 0:15:27.200 obviously at lower levels of volume in some areas than 0:15:27.960 --> 0:15:31.520 than others. But you know, in terms of being able 0:15:31.560 --> 0:15:35.400 to keep them as as strong, maintain their dividends, hold 0:15:35.400 --> 0:15:39.080 on to the employees, they've been spared. As I say, 0:15:39.120 --> 0:15:43.480 the more casual dining concepts have been decimated. If you 0:15:43.520 --> 0:15:46.200 don't have a capital base of which to operate, and 0:15:46.360 --> 0:15:48.760 you you know you live, you operate months to month 0:15:49.160 --> 0:15:52.000 without this sort of government support, you're out of business 0:15:52.080 --> 0:15:56.200 until consumer behavior completely changes again. So let's do a 0:15:56.240 --> 0:16:02.000 little comparison with the industrial conglomerates today. How how do 0:16:02.080 --> 0:16:06.880 they look compared to the conglomerates of of the seventies 0:16:07.040 --> 0:16:10.840 and nineteen sixties that your father was spending a lot 0:16:10.880 --> 0:16:14.280 of time taking apart. Well, I would say, first of all, 0:16:14.320 --> 0:16:17.760 there are far fewer of them today. The conglomerates of 0:16:18.600 --> 0:16:24.320 yesterday were fueled by continual, continuous deal making. You know, 0:16:24.360 --> 0:16:28.640 they were taking advantage of accounting anomalies about you know, 0:16:29.040 --> 0:16:31.840 on treatment of goodwill and things like that that aren't 0:16:31.840 --> 0:16:35.560 the case today. They were also far fatter. They generally 0:16:35.640 --> 0:16:39.280 dealt with very large headquarters, and we were fiefdoms in 0:16:39.320 --> 0:16:42.600 their own And I say today they're much more targeted, 0:16:43.400 --> 0:16:48.920 more disciplined, rarer as I said, and get probably getting 0:16:49.000 --> 0:16:51.760 less of a discount as a result of being a 0:16:51.800 --> 0:16:55.480 little more focused than than the conglomerates of the sixties 0:16:55.480 --> 0:17:00.400 and seventies. What about a giant conglomerates sitting with a 0:17:00.400 --> 0:17:05.199 lot of cash, like Berkshire Hathaway. What what happens to 0:17:05.320 --> 0:17:10.560 that entity in the post Buffet Monger era? You know, 0:17:10.600 --> 0:17:13.520 I'll give you an analogy. I would think of it 0:17:13.840 --> 0:17:15.720 in the same way as one would think of Lows 0:17:15.800 --> 0:17:21.080 Corporation after the passing of the you know, Larry and 0:17:21.200 --> 0:17:25.960 prespentitious standards. Though the you know, they're great assets, great companies, 0:17:26.000 --> 0:17:30.119 but the if you like, the investment dynamism that existed 0:17:30.200 --> 0:17:35.200 with the founding entrepreneurs, you know, at least for now, 0:17:35.359 --> 0:17:37.680 is not the same. That's not a knock on them, 0:17:37.680 --> 0:17:40.760 it's just a different generation. And that would be a 0:17:40.800 --> 0:17:45.360 normal course of events. I think that Berkshire Hathaway will 0:17:45.359 --> 0:17:48.439 probably be the same story. I think they'll you know, 0:17:48.480 --> 0:17:50.840 it doesn't change the quality of the assets when they're 0:17:50.840 --> 0:17:53.680 not there. But I think that the sort of innate 0:17:53.800 --> 0:17:56.400 instinct of when to when to make a big bet 0:17:56.920 --> 0:17:59.520 and what big bet to make is something that you 0:17:59.560 --> 0:18:02.280 don't get to pass on. You either habits or you don't. 0:18:03.160 --> 0:18:07.320 So um, you know. I think whoever Warren Buffett and 0:18:07.400 --> 0:18:12.080 Charlie Manger put in as caretakers, you know, of the 0:18:11.840 --> 0:18:15.400 of Berkshire for the future, they will probably be very 0:18:15.680 --> 0:18:19.840 admirable caretakers. But they won't be Warren Bufett and Charlie 0:18:19.880 --> 0:18:23.360 Maner because you can't be with doesn't know how life works, right, 0:18:23.440 --> 0:18:28.560 There is no replacing those two guys, that's correct. So, 0:18:28.560 --> 0:18:33.000 so you were founder and chairman of Element Solutions, a 0:18:33.119 --> 0:18:38.280 chemical technology company. Seems very different from some of the 0:18:38.320 --> 0:18:42.040 previous companies you worked on. How did you find your 0:18:42.040 --> 0:18:45.160 way to that and was it really all that different 0:18:45.280 --> 0:18:48.720 from some of the other companies you helped to build. No. 0:18:48.880 --> 0:18:53.560 I mean, I'm currently involved in you know, five quite 0:18:53.800 --> 0:18:59.000 significant size businesses, and Element, you know, is one of them. 0:18:59.160 --> 0:19:02.520 Element has the set says the same characteristics as all 0:19:02.560 --> 0:19:06.600 the other ones, which is there the businesses inside Elements 0:19:06.600 --> 0:19:10.080 are the market leaders in their respective niche. It's a 0:19:10.160 --> 0:19:13.440 very high priest cash flow business. It's got good management, 0:19:13.840 --> 0:19:17.679 it's got some really defensible moats around it. Those are 0:19:17.680 --> 0:19:21.480 really core characteristics that you'd find in our Frondsen food businesses. 0:19:21.520 --> 0:19:24.080 To know, more foods, which is you know, same thing 0:19:24.160 --> 0:19:26.920 for a p I, a L safety business, and Royal Oaks, 0:19:27.640 --> 0:19:31.480 you know my charcoal business. That they all are leaders 0:19:31.480 --> 0:19:36.320 in their respective niche markets elements not really as it's 0:19:36.400 --> 0:19:39.880 especially chemical company, but it really is a services company, 0:19:40.320 --> 0:19:42.440 you know when you really get into what it does. 0:19:43.040 --> 0:19:47.480 What it does is it helps manufacturers in their manufacturing process. 0:19:47.520 --> 0:19:50.760 And it's really the technicians as much as the chemicals. 0:19:50.800 --> 0:19:55.320 Could we sell them. That are what our customers pay 0:19:55.400 --> 0:19:59.600 for when they're when they're dealing with various business units. 0:20:00.840 --> 0:20:04.520 M quite quite interesting. So let's talk a little bit 0:20:04.640 --> 0:20:07.680 about what's going on in the world of public markets 0:20:07.720 --> 0:20:11.040 and private equity. You've worked with firms in the past 0:20:11.119 --> 0:20:14.960 like black Stone and Pinnacle. How is it what that 0:20:15.080 --> 0:20:18.760 what you do is different from private equity. I'd say 0:20:18.760 --> 0:20:23.600 most distinctly, it's the difference between owners and renters private equity. 0:20:23.760 --> 0:20:26.639 Even the best of them are renters of businesses because 0:20:26.680 --> 0:20:30.600 they own them with a specific mandate to sell them 0:20:30.640 --> 0:20:33.399 at some point in the future. So in some cases 0:20:33.440 --> 0:20:35.760 that you could be six months, could be five years, 0:20:35.800 --> 0:20:38.320 could be ten years, that they always end up selling 0:20:38.320 --> 0:20:41.280 them because that's the structure of how they have their capital. 0:20:41.560 --> 0:20:44.359 I'm in the permanent capital business, so you know the 0:20:44.400 --> 0:20:47.520 way I invest in the public market. Um, the only 0:20:47.560 --> 0:20:50.920 way that you know I'm a seller is if the 0:20:50.960 --> 0:20:54.720 company itself is sold because somebody comes along and makes 0:20:54.720 --> 0:20:57.440 an offer for all the shares. We don't tend to 0:20:58.160 --> 0:21:00.159 look at it that way. We've put up as us 0:21:00.280 --> 0:21:04.320 is from a very very long investment standpoint. We talked 0:21:04.359 --> 0:21:07.680 earlier about Books a half Away. Probably the same philosophical 0:21:07.720 --> 0:21:11.439 approach in terms of investing that once we own something, 0:21:11.600 --> 0:21:14.280 we intend to build it for the long term, so 0:21:14.359 --> 0:21:19.560 that affects decision making capital investments. Long term approach to ownership. 0:21:19.840 --> 0:21:23.920 Incentives for employees and how we treat employees I think 0:21:23.960 --> 0:21:27.439 are very different in what I do to private equity. 0:21:27.600 --> 0:21:30.879 The analogy I use is if you had an apartment 0:21:31.680 --> 0:21:33.879 and you were a renter, and you you had a 0:21:33.880 --> 0:21:36.640 hole in your wall, you might put a poster up 0:21:36.960 --> 0:21:39.360 to cover the whole, whereas if you're the owner, you're 0:21:39.400 --> 0:21:43.800 going to fix the wall. That, unfortunately or fortunately is 0:21:44.240 --> 0:21:48.800 the difference sometimes in approach. What what's the old joke, 0:21:48.960 --> 0:21:56.439 nobody washes a rented car exactly exactly? How do you 0:21:56.480 --> 0:22:00.640 make sure that your investors are patient capital? There's been 0:22:00.680 --> 0:22:05.399 so much discussion about shareholder value and focusing on the 0:22:05.480 --> 0:22:09.920 next quarter as opposed to the next decade. How how 0:22:09.920 --> 0:22:14.040 do you ensure you're attracting the right investors to be 0:22:14.640 --> 0:22:18.520 owners with you of of the companies you're running. You know, 0:22:18.640 --> 0:22:20.719 that's a that's that's a very good question. I mean, 0:22:20.760 --> 0:22:24.160 the truth is, you don't. What we tend to do reputationally, 0:22:24.200 --> 0:22:27.919 people know by you know, our long history, that we 0:22:27.960 --> 0:22:31.439 are patient capital, and that tends to attract a certain 0:22:31.560 --> 0:22:36.080 kind of institutional shareholder. We are also our own activists. 0:22:36.440 --> 0:22:39.080 I mean, I think that's something that is an important 0:22:39.080 --> 0:22:43.040 point to make if you have shorter term type oriented investors. 0:22:43.560 --> 0:22:45.920 I think when you communicate with them and they understand 0:22:46.000 --> 0:22:48.760 that you're balancing the short term and the long term 0:22:48.800 --> 0:22:53.400 to drive value, that gives investors some comfort for investors 0:22:53.440 --> 0:22:57.359 who really don't care about the business long term prospects 0:22:57.400 --> 0:23:00.320 and just one short term returns. You know, the something 0:23:00.320 --> 0:23:01.879 we can do about that. But they tend to be 0:23:01.920 --> 0:23:05.120 in the minority. But because we've been able to drive 0:23:05.320 --> 0:23:09.119 good value over the long term overall, you know, we 0:23:09.160 --> 0:23:12.359 tend to we tend to attract the right kind of investors. 0:23:12.680 --> 0:23:16.200 You know, I've always believed that you sell equity to 0:23:16.400 --> 0:23:19.399 investors the same way you sell products. You know, there 0:23:19.440 --> 0:23:22.920 are for investors, there are five thousand different public companies 0:23:22.960 --> 0:23:25.800 to choose from. Why invest in yours? You've got to 0:23:25.840 --> 0:23:28.720 give them a reason to be interested in your equity. 0:23:29.119 --> 0:23:31.040 And you know, for people who sit back and think 0:23:31.040 --> 0:23:33.080 it's all going to come their way, those are the 0:23:33.160 --> 0:23:36.679 ones that tend to get you know, undervalued or you know, 0:23:36.920 --> 0:23:39.720 have the wrong kinds of shareholders. We actually make a 0:23:39.760 --> 0:23:43.280 real effort to find the right shareholders that the right 0:23:43.359 --> 0:23:47.800 profile to our sectors, explain to them why our business 0:23:47.920 --> 0:23:55.440 you know, is Merits investments. M quite quite interesting. I'm 0:23:55.440 --> 0:23:59.800 curious about what you described as being an activist and 0:24:00.119 --> 0:24:04.840 esther in your own businesses. What does that look like. Well, 0:24:05.080 --> 0:24:07.560 you know, capital allocation is where you really make a 0:24:07.600 --> 0:24:09.960 difference in terms of return. You know, if you look 0:24:10.000 --> 0:24:14.280 at Jardon's history, we weren't just good owners and operators 0:24:14.280 --> 0:24:17.960 of our businesses when you went to add equity to 0:24:18.359 --> 0:24:21.720 our business, so you went to buy equity back. We 0:24:21.760 --> 0:24:26.200 did some significant buy backs during the course of Jordan's 0:24:26.400 --> 0:24:29.320 evolution at times when we felt that the market is 0:24:29.440 --> 0:24:33.680 significantly undervalued our company, and with hindsight, those decisions were 0:24:33.760 --> 0:24:36.480 very good decisions. So I think, as I say, being 0:24:36.520 --> 0:24:40.760 your own activists and being proactive with capital allocation, whether 0:24:40.800 --> 0:24:44.679 it be for acquisitions or buy backs or you know, 0:24:44.880 --> 0:24:47.680 other forms of financing, you need to be a debt 0:24:47.760 --> 0:24:53.280 at both. It's not just selling your product that that 0:24:53.400 --> 0:24:57.240 can create value for shareholders. So we're always very cognizance 0:24:57.640 --> 0:25:00.919 of that. Let's talk a little bit about these blank 0:25:01.000 --> 0:25:05.600 check investment vehicles. How did you first get involved in them? 0:25:05.640 --> 0:25:08.160 I kind of remember in the ninety nineties they were 0:25:08.160 --> 0:25:11.840