What if Permanent Equity bought a Super Bowl ad? Would it be a good use of capital? How might we pay for it? What would we advertise?

I thought about this the other day after I read and agreed with my own opinion that problems that can be solved with money aren’t really problems if you can get the money. If we had unlimited capital, in other words, we would absolutely buy a Super Bowl ad, which would garner far more exposure than this humble daily, and that would help us become the world’s greatest private equity firm.

The catch-22 is if you have access to unlimited capital and spend it profligately then you will lose your access to unlimited capital and therefore not be the world’s greatest private equity firm (our LPs are nodding…and I assure them that this humble daily costs far less to produce than a Super Bowl ad). In other words, your greatest competitive advantage, if pressed, becomes your greatest weakness (hat tip, Sun Tzu).

Around the same time I was thinking about this, Johnny forwarded me something he read in Money Stuff (yes, I have gotten everyone around the office to read Money Stuff). It was a quote about Adam Neumann and WeWork and how he/it had incinerated many billions of other people’s – but mostly Softbank’s – money.

Johnny’s point was that no capital had been “incinerated.” Rather, it had been “redistributed” to WeWork employees, Neumann, startups that benefited from subsidized rents, and, of course, the guys that flew Neumann around the world on a really fast private jet to go surfing.

I’m not jealous, but more importantly, Johnny’s not wrong (nor a communist)!

Johnny’s question, though, was interesting. If you agree with the premise that this capital was merely “redistributed,” then why do people say that it was “incinerated”?

I think this goes back to the idea that having capital is a privilege and that funding something is one of the most meaningful things you can do for someone else. And if you agree with that, then the reciprocal is true. Receiving capital is a privilege and earning a return for someone else is one of the most important things you can do. 

Was Adam Neumann trying to build something interesting? Maybe. But he incinerated capital in the sense that he prevented it from being provided to someone who might have done a better job investing it in something meaningful. Does that mean the capital is gone forever? Of course not. 

But hopefully the next steward will do better. Better for others, that is. It’s hard to do better for yourself than by flying around the world on a really fast private jet to go surfing.

– By Tim Hanson

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