Permanent Equity’s Secret Formula
I got an email the other day from someone who was raising capital. When I asked about information he said, “We’ve been working with Bain, so have quite a bit of content.”
And so they did. The data room we were given access to was chock full of charts and graphs and decks.
Now, at Permanent Equity, we are notable in that we go out of our way to tell the leaders of our portfolio companies that they don’t have to waste time on those things. We don’t do quarterly board meetings, and we certainly don’t want someone with competing priorities spending hours designing PowerPoint animations. The reasoning is that that frees them up to focus more time on items that will actually move the needle.
But is there a middle ground?
I spent a great deal of time recently trying to distill what Permanent Equity does into a mathematical equation. (After all, if something can’t be written as a formula in Excel does it actually exist?) Here’s what I came up with:
In other words, our success as an organization depends on raising capital, investing it well at scale, and making gradual improvements in those investments over a long period of time. That may seem self-evident, but distilling it to that formula took a while. Was the time worth it to now have a graphic for an investor deck? I think so. It was a clarifying process, and now I can explain what we do in a sentence.
See, sometimes there’s value in going through the motions. I thought about this the other day when I listened to Brent’s conversation with Shane Parrish and Shane remarked on the difference between ritual and discipline, saying that you need motivation to do something three days a week, but not to do the same thing seven days a week. The reason is that the latter is a ritual, not a choice.
In college I took a writing class where the only assignment was to write 1,000 words by 9am each morning and then walk them over to the English department and drop them in the professor’s inbox. It didn’t matter what you wrote, you could write the word “word” over and over 1,000 times, it just mattered that you did it.
At the time I thought the assignment was nonsense. I appreciate now that he was helping us realize that if you wanted to write, writing was not a choice. And in doing so much writing, you often started writing something that wasn’t half bad.
That’s the paradox for me of repetitive processes and things like investors decks and standing meetings. They’re not always valuable, but in doing them, value is often created. So how much time is the right amount of time to spend on them? I have no idea.
– By Tim Hanson
