Good Outcomes that Matter
I was doing research for a panel discussion I hosted at the recent Main Street Summit (you should come next year) and so I found myself reading the annual letter published by Max Anderson. Max is the cofounder and managing partner of Saturn Five, and the reason I was reading his letter was because Max was going to be part of said panel discussion and it’s always better, if you’re hosting a panel discussion, to know something about the people you’re talking to.
Not dissimilar to Permanent Equity, Saturn Five is a private equity firm that buys and operates “Main Street service companies” in pursuit of building a “diversified family of cash-flow-generating small businesses.” Laying out his investing principles in that letter, Max noted that his number one objective is to “Find a horse worth riding in a race worth winning.” He defines this further as buying companies good enough to compete and win in a market large enough to support attractive growth.
That not only resonated with me, but rhymed with something we’ve recently been saying at Permanent Equity. That is to focus our time, effort, and attention on things where we can move the needle and where the needle is worth moving. Because what these aphorisms have in common is the observation that opportunities have two parts: the merit and the context. The merit is the idea that a good outcome is achievable. The context is the idea that achieving the outcome will result in measurable good.
The reason we’ve been saying that around Permanent Equity recently is because we have an increasing number of problems as our own diversified family of cash-flow-generating small businesses grows (another thing we say at Permanent Equity is that we’re in the business of fighting entropy, which is both indefatigable and undefeated), and the thing about problems is that they are all time-consuming to solve, so in a world of finite time and resources and in recognition of opportunity costs, when you have an increasing number of them you have to be strategic about picking which ones to tackle.
So now when we’re invited to help solve a problem we ask (1) Can we help solve it? and (2) Is it worth solving?
The question of worth is, of course, a tricky one and always a moving target because there are a lot of ways to measure benefit and reward, but if you’re evaluating anything, evaluate the merit and the context together. Because I think we’re all universally in pursuit of good outcomes that matter (though I don’t mean to speak for you).
– Tim