Tracy Britt Cool on Warren Buffett, Capital Allocation, and Building Enduring Businesses

Tracy Britt Cool

Thank you. It's an honour to be here. I appreciate it.

Tracy Britt Cool

On the biographies, I just read Melinda Gates' book on transition that she came out with not too long ago, which I thought was super interesting. I reread Alan Mulally's American Icon, which I think is fascinating in terms of a turnaround and the impact of that. And I recently reread Katharine Graham's autobiography.

That's been my focus and where I've found the most interest recently. And then also several books on parenting. The Anxious Generation, obviously, a lot of people are talking about, but that has spawned me going down a path of reading more about kids and free-range kids, books like that, on how to think about parenting in this new world.

Tracy Britt Cool

We have four. Ages 10, 7, 5, and 2.

Tracy Britt Cool

I thought it was single-handedly the best book on navigating a turnaround. The time in which he did it, how challenging it was, the landscape in 2008, 2009, Ford, and the auto industry — really, really challenging. And just the discipline with which he did it. His team would come in and everything was green every week, even though he was trying to get them to celebrate having reds in the business, to surface the challenges, to learn from those, to see that making mistakes is okay.

Having done a turnaround at a much smaller scale, I was incredibly impressed with his focus on people, his focus on discipline, his focus on building a culture of continuous improvement, learning, and making mistakes. I thought that was really eye-opening — how he did it against the backdrop of the time he did it.

Tracy Britt Cool

I couldn't agree more. When you're in a company and you set a culture and expectations and an operating system, then you say to your employees, is this what you want to be part of? And if not, we understand that and you can choose to leave the business, but if you want to stay here, you need to get on board.

When I was CEO, we were going through a transformation, and I said to our team often — and they almost told me to stop saying it — 'If you're not having fun four days out of five in this new culture and environment, it's probably not the right fit for you, and we encourage you to move on. We'll promote you to customer, whatever it may be.' You want your team to be really committed, engaged, focused on driving the results, but also to have it resonate with them and to care about it.

Tracy Britt Cool

It was really interesting. I took the role at Pampered Chef having no prior experience operating a business. I'd been at Berkshire Hathaway for about five years. I had a view that the investing landscape was shifting, that more value would be created going forward on the operating side, but that very few investors actually have operating experience, especially on the more buyout side. You see it more in venture, but less in buyout. And I thought I'd be a better investor if I got out of the boardroom, got into the war room, and actually went and operated a business. So I decided to become CEO of Pampered Chef.

Pampered Chef was a business in need of transformation. It had been in decline for about ten years since Berkshire bought it. But the fundamentals were intact. It had a really strong brand and a strong channel, so the moat was really there, but it had lost its way. Not dissimilar from a lot of the ebbs and flows of consumer businesses, where you grow, but your customer changes or the world changes. In that case, the world had changed quite significantly. The internet had come along in the early 2000s, which fundamentally shifted the business, and the customer started shopping differently and shopping online.

Pampered Chef was originally started 45 years ago now by Doris Christopher in the basement of her home, to solve the need of providing high-quality kitchenware products to families around the country through a direct sales model. There were consultants who sold the products. So in 2014 or 2015, when I took over, it had ten years of decline. It was an interesting opportunity to come into a business in need of transformation, where there was this chance to rethink the business model and the approach — but I'd never done it before. It was a fundamentally new role for me, in an industry I didn't know. Ironically, I don't cook, so I had to learn the basics. But it was a really great opportunity.

Tracy Britt Cool

For a long time in the investing world, on the buyout side, there was an opportunity to buy businesses at seven, eight, nine times, and then a few years later, with some minor improvements, sell them for ten, eleven, twelve times. That has shifted, because capital is now commoditised. There's a lot more capital available to sellers than there ever has been. In the 1980s, there were 20, 25 private equity firms. By 2020, you got close to 20,000 in the US. So a significant shift in the capital that's out there.

As sellers, rightfully, gain more of that value when they're being partnered with, that means you have to create more value after the partnership starts — and that means more of a focus on operating. In traditional private equity, the focus is very short-term. You buy a business, you're focused on selling it three to four years later. And in doing that, you make short-term decisions about the business. If you're going to really create long-term value, there's a value in having a longer-term approach.

When I wanted to become an operator, it was, 'I know I'm going to need to create value in companies once you partner with them. How do I think about that, and how do I become a better operator? It'll make me a better investor.'

Tracy Britt Cool

There are a few reasons. One is that change is happening faster than it ever has, and it's very hard when you're managing a business and you're focused on your customer and your product or service to also focus on the outside world and landscape. You have things like COVID, tariffs, supply chain. There's always something happening, now AI. What does that mean for your business and how do you navigate it? Also, a lot of false starts. You don't know: is this here to stay, or is it something that's going to be gone quickly? As a leader, that's challenging to navigate.

Second, most leaders grow up in a business. When you grow up in a business, you become an expert in that business, that field, that industry — but sometimes you don't have the perspective of seeing other industries that came before you that are different but similar in terms of what happened. You gain depth of experience, but that perspective is harder to have. For us it's, how do we help leaders think about that and help them see around the curves? Those are a couple of reasons it's becoming more difficult for leaders.

Tracy Britt Cool

When I went to college, people would say, 'Where are you from?' And I'd say, 'Manhattan,' because that's what you say in Kansas, and people would ask, 'Oh, are you from the Upper East Side?' I'm like, 'Well, there's not really an Upper East Side.' I quickly realised Kansas was sufficient, because most people don't fully appreciate there's another Manhattan that's much smaller.

Tracy Britt Cool

I joke that I spent much of my life trying to get off the farm, and now I want a farm for my own kids, because it's such a valuable landscape to learn — to learn work ethic and commitment and problem-solving, all the things that come with being on a farm.

My dad owned this farm and he loved it. So the first lesson I learned: when you find something you love, it really is a passion, something you enjoy, and you're not really working. My dad worked harder than anyone I've ever seen — late at night, early in the mornings, all summer long, all through the winter. He took a small break, but that was about it. For him, it wasn't working. It was what he loved. That passion was something I recognised and saw early on.

Second, I learned a lot of independence. On a farm, the nature of it is you're figuring things out. There are a lot of inherent dangers and risks. I was driving when I was 11, 12 years old on the farm — not on the road yet — but I learned how to navigate unfamiliar situations, which was an important lesson early on.

And I learned about business from a very young age. When I was in third or fourth grade, I started running my own farmers market stand. My dad would drop me off in the morning, I'd run it for the day, and he'd pick me up at the end. We got really busy and I started hiring my friends, and I got to practise: do I pay them by the hour, do I pay them a commission, do I pay them a bonus, how do I get the best performance out of them? I started thinking about supply and demand and pricing. Early in the season, watermelons were $8 each when they were limited; by the time we had a lot, they were $2 each. Learning the fundamentals of a business was really valuable, even if it was a farmers market stand. I could get better every week, build the foundation of a repeatable, scalable system to improve my odds of success. Our stand went from making $500 a week to $1,000 to $1,500 by the time I had really scaled it up. It was a fascinating learning experience.

Tracy Britt Cool

Definitely self-driven. I was the youngest of seven kids. My dad had been married previously — four from his first marriage and three from ours. He just let me do a lot, probably more than your average kid, because he was older and had seen it all. My brother navigated the farming part of the business — that wasn't my passion, but the business side I did love. It started small with my own stand, but over time it was running our whole store and more and more of the business. It wasn't my dad's passion either; he loved the farming side. It was an opportunity to really learn and try different things in a relatively safe space, which was amazing.

Tracy Britt Cool

It wasn't as structured or disciplined as I would have thought. I knew I wanted to leave the farm. As much as I liked the business side, it was very hard manual work, and I wanted to go do something else. I didn't know what that something else was, but I knew I wanted to leave. In high school, I decided education was the way to get there. I'd always had good grades, done a lot of extracurriculars, and managed a lot on the farm, and I wanted to apply to a lot of colleges. I didn't know which one or where, so I just applied everywhere, because I didn't know anyone at that time who had gone to Harvard or other schools really outside of Kansas. It was a great opportunity to put my hat in the ring and see what would come from it.

Tracy Britt Cool

There were a couple of components. One is I had a mentor who had done something similar at a different school, and she advocated that if I knew what I wanted to do, it was a path that allowed more efficiency and not having to revisit it later in life. At that stage, I had found business, I had found investing. I knew I was passionate about those areas.

I also think — and I advise students now — that going straight from college to business school, you need to be ready on three metrics. Socially, you're going to be with students much older than you on average. Academically, can you bring something valuable and insightful to the classroom? And career-wise, you're going to be competing for jobs with people who have more experience. Socially, I'd always felt older than my peers — growing up on a farm or in a family business, you get more independence and age a little quicker. Academically, I hadn't been in a traditional career, but I had run our family business from a young age, so I had experiences to draw from. And on the career front, I didn't know where to go, but I felt like I'd figure it out. That wasn't what I was going to business school for. It was to learn and grow and become better in terms of my own expertise and skills.

Tracy Britt Cool

I actually started writing letters in college to CEOs, and I just wanted to learn. I wrote to different CEOs in business and finance saying, 'Can I come and pick your brain?' I wrote a letter to Ace Greenberg at Bear Stearns and he graciously said, 'Yes, come down and visit.' I went to the trading floor, sat with him for a couple of hours, and he answered my questions as I thought about investing. He was obviously a legend in finance, but he was gracious and willing to spend time with me.

That was a huge lesson: people want to help other people, and they especially want to help young people. Being a student, I was able to get access to people who otherwise probably would have said no — and probably should have, in terms of their time. But it was a really great opportunity. I'd written one of those letters to Warren Buffett to bring his group of students out to Omaha in college, and got to know him a little through that. I wasn't actually writing letters for jobs; I was writing letters to learn. When I graduated, I had a full-time job — I'd been an intern and then come back full-time at a company where I'd met Warren over the student group visits. I decided to write him a letter, and that's how I ultimately ended up at Berkshire.

Tracy Britt Cool

Warren is very gracious with his learning and his knowledge, and he shares it widely — at the annual meetings, in the annual letters. I felt like I had a front-row seat to really understanding that and seeing it in action. The lessons are timeless, and they're what he espouses relatively consistently through those maxims, which is great, because everyone can learn from him.

The value of long-term thinking and long-term compounding — the eighth wonder of the world is compounding, and the value of that. If you think long-term and are set up structurally to think long-term, there's a lot of value in that. Second, the value of people, finding the right people with high integrity, people who care about what they're doing, and then giving them the right incentives and encouragement. Warren gave the people around him — his CEOs and others — really great autonomy and high expectations, but really let people have flexibility. And I saw the value of that. And lastly, the value of continuous learning and improvement. Warren reads every single day, gets smarter, gets better, and those in the Berkshire ecosystem do the same. That resonated with me from when I was a kid on the farm — my dad also focused on getting better and continuous improvement in a different field. It was something I saw reinforced at Berkshire.

Tracy Britt Cool

Berkshire is a phenomenal place. It's unique, one of a kind. I don't think there'll be another one. But Berkshire is very large in terms of capital. It's hard to deploy capital, hard to find really great investments, and it's especially hard when you're very large. I saw an opportunity to help mid-size companies with a long-term approach and creating value. As much as I loved my time at Berkshire and would have been happy there forever, I felt there was this opportunity to create something new and special that was serving a market that really wasn't being served well today.

Tracy Britt Cool

It's hard to say what's similar, because Berkshire is so unique and special. It's one of a kind, and I don't think we think we're going to replicate that by any means. What we're trying to do is focus on the long-term — creating a long-term structure with a long-term horizon to buy and build businesses with the right approach, one that we think is valuable to the companies, to employees, to customers, and ultimately to investors. Second is finding high-quality businesses that have some sort of moat or competitive advantage. Great businesses are hard to find, and when you find one with a moat and a long runway, you can really invest behind that.

And one thing we do distinctly differently from Berkshire is that we're much more hands-on operationally. That came from when I was CEO. What I felt was that it was very lonely. It was challenging and hard, and I was out navigating and trying to find resources, support, people who had come before me who could help me in that seat. I kept thinking, it would be so nice if there were someone who could tell me how to do a great strategic planning process, or how to improve my hiring skills, or how to build the right culture, or what great looks like in these different aspects of managing a business. So when Brian Humphrey and I started Kanbrick, we really wanted to focus on how we build a system to help these mid-size companies and be the resource we wanted when we were operators. We built the Kanbrick Business System focused on that.

Tracy Britt Cool

I think of it in three ways. One: do you think long-term? Do you have a long-term horizon and perspective? A lot of people can say 'I think long-term,' and they may, but that's only one component. Second: do you have a structure that actually allows you to think long-term? Because if you naturally have a structure that doesn't allow for that or doesn't encourage it, you're going to be pitting your long-term horizon against a structure that encourages you to make shorter-term decisions. If you're focused on selling a business in three to five years, you're going to make short-term decisions, because your structure requires or incentivises you to.

And third, there are differing degrees of long-term. There's the 50-year long-term, which is really long-term, and then there are differing gradients. I don't think all long-term is equal, and I don't think you need 50 years to be long-term. There's something in the middle that lets you take advantage of that horizon and structure, but gives you some flexibility so you're not locking yourself up forever.

Tracy Britt Cool

Yes. We always say there's a balance of short-term and long-term. You can't only think about the long-term. If you only think about the long-term, you probably won't get out of the short-term, because you'll miss the situations of today.

When we were at Pampered Chef, we were turning around the business. Brian was the CFO, I was the CEO, and we had a management team helping drive the transformation. We were a couple of years into the turnaround and the business was actually doing quite well. Then in year three, we had a setback. What we saw was that we were focusing too much on the long-term — our long-term strategic initiatives, our investments in international growth and new categories. We had lost sight of the fundamental blocking and tackling of today. We'd thought, 'We focused on those for two years, we improved them, now we can set our sights on longer-term thinking.' But in reality, you have to manage the short-term and the long-term. We had to refocus, really work on the sales today, the challenges we were facing in the moment, in order to give us the space to think about the long-term as well.

Tracy Britt Cool

Yes. Often we think of the big things we could go do — what should the strategy look like, what's the future vision — versus how do we do the fundamentals, and do them well? Some of the best CEOs focused on the fundamentals. Sam Walton at Walmart was all about the fundamentals — he was in a store every week, multiple stores every week, focused on how they deliver for customers more effectively. That's a really important skill set that's often undervalued or underappreciated, especially in mid-size companies where there's a lot of blocking and tackling to be done every day, and often it rises all the way up to the management team and the CEO. It's not something where just your front line handles it; everyone needs to be focused on it.

Tracy Britt Cool

In this situation, we did change much of the team. The business had been in decline for about ten years, and during that period a lot of probably great people left, or the skill sets we needed for the transformation weren't there or had atrophied. We needed an infusion of talent.

As an example: when I started, 10% of the business was digital, 90% was sold in person through in-person parties. Employees didn't even have laptops. But the customer was shifting dramatically, shopping more online and more on mobile, while we were selling through an in-person party model. So we needed to shift our mindset: how do we actually meet customers where they are? We needed to be more digitally focused, and to shift our own thinking about technology from back office and support to a true revenue generator. We needed a new leader in technology, and ultimately much of a new technology, marketing, and sales team to complement that. We brought in a new leader who transformed how we thought about technology and served the customer. We took the business from 10% digital to 75%. We still did that through the channel — through the sales consultants — we didn't go on Amazon or sell direct. We focused on how we utilise our competitive advantage, the channel, but help them be more effective digitally. It's a good example of how sometimes you need a different skill set or experience to go where you need to go, and the legacy team doesn't always have that.

Tracy Britt Cool

We really focused on it early, understanding what our employee value proposition was. Why would someone want to come to Pampered Chef? What we found was that people weren't coming because they loved the product or the location. They were coming because they wanted to learn and grow. We could give them opportunities through a meritocracy to learn and grow more quickly, get rewarded for it, and be excited by what we were doing.

We really focused on storytelling: what are we going to go do? We're transforming a business. We're going to reinvent mealtime. We're going to focus on our purpose, which was enriching lives one meal and one memory at a time. That started to resonate with employees who were passionate about learning, growing, and doing something unique. Then we focused on our culture — how we accomplish that through opportunities, promotions, incentives, growth, but also engagement, giving feedback, helping people grow and develop. We ended up attracting a lot of people who wouldn't normally go to a kitchenware products business. I wouldn't normally go to a kitchenware products business, but they saw an opportunity to build something unique and special.

Tracy Britt Cool

Absolutely. If your time horizon is 'I'm going to sell the business in three to five years,' everything you do is going to be short-term in nature, just because of human nature and how you're incentivised. You come in and say, 'Should I invest in growing into markets, or should I take price right now? Should I build a strong people system and culture that may not pay back for three, four, five years, or should I take costs out right now to increase my short-term value?' Every decision, it's going to be really hard to make the longer-term one, because the pressures are skewed to a shorter-term action. The structure creates the wrong incentives.

Any leader will tell you that you don't usually get payback as quickly as you think. To get payback in one, two, three years is hard — versus, 'We're going to move into a new market,' which might take a few years to set up, or 'We're going to invest in building a new crop of talent so they're ready to lead in five years.' Those are long-term in nature, but if your structure incentivises a shorter-term duration, it's hard to make those decisions.

Tracy Britt Cool

Absolutely. I've been in a number of businesses where people say, 'Oh, if we can just get the margins from 10% to 12%,' and I'm like, 'Well, that's really hard to do.' When I took the role at Pampered Chef, I had advised the business for about a year, so I had a pretty good sense of what needed to be done. I thought it would take me a year or two to drive the change, and it took almost three or four, because everything took longer and was harder — getting the right team, the right culture, investing in the right systems, updating the marketing and the product. If my task had been to sell that business in three or four years, I don't know if I would have done all the same things. I probably would have made shorter-term decisions that ultimately would have created less value.

Tracy Britt Cool

Yes. We all have incentives in life, and recognising what the incentives are often shows us what behaviours we'll have and what decisions we'll make.

You mentioned culture. Culture and people are the most foundational and fundamental aspect of any business, any size. In mid-size companies in particular, it's incredibly valuable, because you often have more limited resources. Your team's smaller, so people are doing more in terms of scope and capabilities. They're often very passionate and committed, but we don't always invest in that culture. The best businesses figure that out, but as companies scale and get bigger, there's more complexity on the people side.

So we always start with people. Do we have the right people in the right seats? The right culture? The right engagement? The right talent development and talent management? We focus on people and the foundation first. We focus on purpose second: what's the purpose of the business? What difference do we make in the world? Are we aligned around that? What's the strategy to execute that purpose? And then we think about performance third: how do we actually achieve those goals, drive alignment and accountability, and focus on purpose? If you start by focusing on performance, you miss out on the foundation settings that are so critical to alignment and to driving the most value.

Tracy Britt Cool

It's taking a disciplined approach to how we think about people. It's not just, 'How do I reward people more,' or, 'How do we have more holiday parties.' It's a structured, disciplined approach. We always say: businesses typically have a structured view of strategy or KPIs or budgeting. They have a calendar and discipline around that. So we ask, where's your people calendar? What's the same level of discipline you have on people? Because you should have the same.

We put it in three buckets. First, how do we attract the right talent — hiring, employer value proposition, the most critical roles to get right? Second, how do we develop talent — are we thinking about where people are going in their careers and helping them get there? And third, engagement — are we engaging our talent, thinking about culture, incentives, communication, and doing that effectively to support the whole organisation?

The whole people framework is so significant, but it usually is an afterthought. If you look at executive teams in mid-size companies, there may not even be an HR leader; if there is, it's a more junior generalist rather than a true talent partner. So that weight falls on the CEO, which is a lot when you're trying to navigate everything. As you scale, it becomes more important. When you're small, everyone is close to the CEO — they see it, they feel the culture, the work ethic and discipline. As you get bigger, you need a system and structure that allows for that to continue, because not everyone's going to be sitting shoulder to shoulder with the CEO.

Tracy Britt Cool

When we go into a new business, first we really try to understand the mission-critical roles. We find most mid-size companies have between 15 and 30 roles that are the most critical to get right — the ones creating the most value. It may be sales in one business, product development in another, finance in another. Do we have clarity on what those are? Do we have the right capabilities? Sometimes there's a mission-critical role you don't have today that you need — my Pampered Chef example, where technology was mission-critical and we didn't have those capabilities, so we had to build it.

Once we assess the roles, we assess who's in them today. Are they rock stars? Are they people with a lot of opportunity to progress? Or are they okay today but maybe not the right people longer-term? The best way is to go in with someone — I usually send a list of questions across a few frameworks: industry questions, company questions, department questions, personal questions. You can usually get someone's assessment and view of the world pretty effectively by talking to them about what they're seeing, and that helps us learn about the business as well.

Once we're in a business, we focus on developing talent. It starts with goal-setting at the beginning of the year and clear KPIs — because how do you assess people if you don't have clear KPIs? You set the KPIs, then give people the flexibility to achieve them; you don't tell them how. But you give them the skills — we do problem-solving training and support so they're equipped to achieve the goals — and they have visibility and alignment. Then we incorporate real-time feedback: 'You did this really well; this is what we could do better.' Alongside that, you run a leadership development process where you identify your leaders, help them understand the vision, expectations, and strategy, and ultimately have them help shape that strategy. It's a structured way of bringing people in at the right stages to enhance their development, learning, and contribution, so we can leverage their expertise even more.

Tracy Britt Cool

The biggest tell is what I call hand-waving. You ask a question, and rather than answering it, they go all over, hand-waving around. Or you drill in more and the hand-waving begins, where they can't really explain it. People who know their craft, their business, and the fundamentals can really explain why they do certain things and why they don't. They may not have all the skills to fix it, but they understand what the issues are, and then our goal is to help them address it. Can they get clear and crisp? Do they really understand what's going on in their space? They don't need to understand everything in the business, just the area they're responsible for.

The best people often have a natural curiosity to solve issues, or views on things even outside their area. One question I'll often ask is, 'What are we not doing that we should be?' People often say things in their area, but often things in other areas too — 'Hey, if we could focus more on selling to customers digitally, that would transform the business, and we're not doing that today.' That helps me see whether they have that innate engagement, excitement, and curiosity.

Tracy Britt Cool

For me and my role, it's understanding where we are in the conversation and who I'm talking to. People on the front line may not have the 30,000-foot view on where we're going, but they're going to be really good at the ten-foot view — understanding the problem they're trying to solve, what's limiting them, what's holding them back. So it's figuring out the right level to have that conversation.

Tracy Britt Cool

We find areas we like. We say, if we want to go fishing, we want to find a pond with a lot of great fish. So we want to understand what industry has a strong moat or competitive advantage. We look at that by asking, what are the returns on capital in the space? Quantitatively, can we see if there's a moat? Then qualitatively, can we understand the moat — how wide is it, is it getting wider or narrower over time, is it durable, will it withstand the test of time?

Once we find industries that fit, we spend a fair amount of time reaching out to businesses, finding them, getting introduced. We have operating advisors who help us understand as well. Then another group of businesses just come to us — people who hear about what we're doing and are excited, and say, 'Are you interested in my business?' We always have the same assessment: what's the moat, quantitatively and qualitatively? We've also built a community of 3,000 CEOs, owners, and founders that we bring together to provide content, resources, and support, and through that we learn about new businesses and spaces. We only invest in one or two companies a year. We'll look at 500, so we're really selective at finding the highest-quality businesses with a long runway.

Tracy Britt Cool

We call it the five Ms. First is moat — what's the competitive advantage? Second is the market — you may have a moat, but is the market growing, and is it attractive? What's the growth rate, and what are the likely dynamics? Third is management — does it have a strong team today, or is it something where we can help build the team? Sometimes there's a great business with three strong leaders, but they need a sales leader, or a talent leader, or a finance leader. Can we help them build that?

The fourth is what we call more potential — some opportunity that's not being fully leveraged today that we think we can help with. It might be expanding into new markets, or a more structured approach to how they manage the business. And the fifth is margin of safety. By that we mean we don't want to have everything go perfectly right in order to be successful. We want a little flex, so that if there's something like COVID or a downturn or a tariff, we can navigate it well with the management team, and we don't put undue pressure on the business to make shorter-term decisions because of something outside our control.

Tracy Britt Cool

Moat is a competitive advantage. The simple example: it's a castle. Do you have a castle that's a strong business? The moat around it is what defends the castle and protects it. A wide moat protects it more; a narrow moat protects it less.

A moat can be driven by different dynamics. You might have a brand and a channel that in combination keep customers in your business. You might have a competitive position that lets you be the low-cost provider, which lets you attract customers, get route density in your market, and drive prices and costs down further, which attracts more customers and keeps others out. There are lots of types: network effects, supplier power, customer concentration that can limit or expand your moat. We're really focused on how we build a business that keeps competitors and new entrants out as effectively as possible.

Moats are changing every day. Some businesses that used to have amazing moats, like newspapers, have eroded considerably. Others are getting stronger. We try to find businesses where we think we can expand the moat.

Tracy Britt Cool

It's hard in the moment to say this moat is getting stronger, because it's easier to look back over ten years and see that the moat got better or worse. AI is a good example. It will probably erode a lot of moats in a lot of industries, because it reduces the friction or cost for a new entrant to come in and navigate the space more effectively. But there will probably be a subset of businesses where AI makes their moat stronger, because they already have a structured system giving them a competitive advantage. Maybe they built a sales force with a technician base that's hard to replicate, and now AI lets them quote more effectively, reduce costs, and improve productivity, so their costs go down, they pass that on to the customer, and keep more customers. It's probably a little early with AI to say who's going to be the biggest winner and loser, because it's a bit of a crapshoot at this stage.

Tracy Britt Cool

The biggest question on my mind is, how temporary is it and how quick is it? Will it be a race to the bottom, where prices go down and other entrants come in and the customers capture the value rather than the companies? Or do you already have a moat, or can you build one in a time that lets you sustain it and get a stronger business? We're spending time thinking about that, especially in service businesses. There are some where it's just harder for a new entrant. If it's a regulated space where you have to be credentialed and there's a limited number of credentials, that's harder. If you have a huge sales and service force going out and supporting customers, that's harder to replicate — not impossible, but harder. Do you have that aspect of your moat already that you can reinforce? The disruption's coming; it's going to happen widely across different businesses and industries. So if you have a great business today, are you thinking about that, and can you reinforce your moat to make it stronger?

Tracy Britt Cool

In essence, return on invested capital. Is it going up, down, staying the same? Is it reasonable for the space? If you have a moat, you can usually see it in your returns on capital. But beyond the quantitative is the qualitative — can you define it, can you explain why you understand it? That becomes more important, because with newspapers, once the moat started to erode, it still looked good quantitatively for quite a period, even though qualitatively it was starting to erode. The financials lagged and then caught up. So we try to look at both.

Tracy Britt Cool

We look at the earnings in the business and then the capital required to support those earnings, and get a ratio. We typically say an okay business is maybe 20% return on capital, and a great business is probably 50% plus.

Tracy Britt Cool

We usually look at EBIT — earnings before interest and taxes. Our view on EBITDA is there are some industries where it makes sense, but in most industries depreciation and amortisation is real. If you focus on EBITDA you sometimes give yourself false confidence about what the business really generates, because you're trying to get a proxy for cash flow and cash generation. So we usually look at EBIT, and in some cases EBITDA, but we're selective, using it only in industries where depreciation and amortisation aren't real.

Tracy Britt Cool

We're looking at what's actually required in the business — your PP&E, and if you need a lot of accounts receivable or inventory to support the business. Every business looks different. There might be a business where earnings look great, but then there's a huge inventory on the balance sheet to support that level of earnings, and that's a slightly less good business, because you have to have that inventory. Maybe you have a lot of locations, so you need facilities and inventory; maybe your customers require you to hold a lot of inventory.

Your best businesses usually don't require a lot of capital. But there are caveats. You can get a higher return on capital, but someone can also enter the business more quickly if you don't have much capital in it. If you have capital in your business, that's usually harder for someone to enter. You see a shift here: historically, tech businesses like Google didn't require a lot of capital — they had network effects and other dynamics driving the moat. Now with AI that's shifting considerably, but that probably also makes it harder for someone else to come in.

Tracy Britt Cool

One is growth — what's the growth rate? Is it growing at GDP, above GDP? Is it sustaining? The market might be growing very fast right now but declining over the next five years, or we might think it will keep growing at 20% plus a year for ten-plus years. Second, we try to understand the dynamics. Is it fragmented with a lot of players, or a couple of behemoths? Is there an opportunity for consolidation? Are the other players rational? If it's more concentrated, how do we think about the path forward and where we'd play? But we start with growth rate and dynamics.

Tracy Britt Cool

No, it's less a lottery ticket and more, where's the opportunity to grow this business and what does it look like? For example, we partnered with a company, Marine Concepts, that sells boat covers. It was started by a gentleman, Randy Kent, based at the Lake of the Ozarks. He had a facility and a market there — great market share, great NPS, an incredibly strong product. He'd sold a bit in Florida, but hadn't really expanded beyond that. So the more potential was: can we take this company with a great product, reputation, NPS, and margins, and expand it? In this case we wanted to build out a dealer network.

Or JM Test, a 40-year-old family business started by the Morrison family, that grew 20% a year over 20 years, in ten branches and regions today — but with an opportunity to move geographically into new regions, increase penetration in existing markets, and look at acquisitions of other family businesses that want a long-term partner.

That's versus a business already at full potential — operating super well, not many growth drivers left, growing at GDP, where it's hard to accelerate growth, like Coke. Playing in the mid-size market, there's a lot more opportunity. We always start with our purpose, which is helping organisations and people reach their full potential. As we think about a new partnership, what's that full potential, what's the opportunity for us to help them get there, and do we bring a skill set, experience, or perspective that can accelerate it?

Tracy Britt Cool

I think of it as growth potential, but it may contribute to margin of safety. If the business will work at this valuation even if we don't do anything, and then we're able to drive this growth, that gives us more comfort in the margin of safety. They can be interconnected, but they don't have to be.

Tracy Britt Cool

Actually, before day one — when we close, during the process where we're getting to know each other and doing diligence, we're spending time really understanding their views on the industry and the business, what management thinks the biggest opportunities are. We're often doing interviews. Our Kanbrick Business System team will spend time meeting with 70, 75 people in the business, understanding where they think the opportunities are. So we're doing that during diligence, going up to the close.

Once we close, we try to understand where they are on their own journey. We have a diagnostic to assess all these frameworks — attracting talent, developing talent, engaging talent, strategy, KPIs, budgets. What's their self-diagnostic on their sophistication in these areas? They do that, we do that, and then we come in and say, given this, what do we want to build together?

There are a few critical components of the initial partnership. Usually there's a strategic planning process. Our KBS team comes in and works with the management team to think about the future direction — what are the opportunities, what are we doing well, where are we not doing as well, where can we grow, what are the challenges? That's collaborative and hands-on. Simultaneously, we ask: do we have the right capabilities, roles, and people to support that growth? If we want to expand into new markets, do we have that capability? If we want to do acquisitions, do we have that capability? If not, how do we build it or add that talent internally? Then we build a road map for the first 12 to 18 months.

We say: I've been CEO, my partner's been CFO. We don't want to be the CEO and CFO again. We're not trying to do your job. We're trying to be the resource we wanted — helpful on the biggest strategic decisions, really partnering with them, giving feedback and help along the way in those critical areas.

Tracy Britt Cool

Think of it as co-creation. They have a view, and they're going to be smarter about the industry than we ever will — the depth of knowledge, what's worked, what hasn't. What we bring is outside perspective and a lot of questions. We'll say, 'Have you thought about this? What about that? There's an industry like this we've seen, where ten years ago this happened, and it looks like it might be similar. What might be the same or different?' We do that together in partnership, so we can co-create and get to a shared vision of what we want to build.

Then we come in and help with the skills and frameworks to do it. We have someone on our team who specialises in KPIs and the budgeting process, who helps them implement a KPI process — how do you build KPIs, what do good ones look like, what are the important drivers, what are the right benchmarks? On budgeting, or resource allocation, do we have the right resources to fund our future growth? How do we become more efficient in some areas so we can invest in others? Or we have someone on our people team going in and asking: to drive this growth, what are the mission-critical roles, do we have the right skills and people in them, and if not, what changes do we need? We might realise we need to engage our middle management — implementing quarterly director days to help them become better leaders — or that we haven't done much on engagement and communication, so we need quarterly town halls where we help the company understand the vision and strategy, so everyone's bought into what we're trying to do.

Tracy Britt Cool

Correct. And these are all the components of it we're talking about.

Tracy Britt Cool

When I was CEO, I wanted to learn from others, and I found that some of the best companies out there have a scalable, repeatable business system — Danaher, Marmon, Toyota. It's an integrated way of managing the business, so it's not piecemeal; it's a holistic approach where the components reinforce each other. If you do one in isolation, you get less value than doing them together. You could have a strategy process, but without the right people and skills you'll be less effective implementing it. If you have amazing people and a great culture but no KPIs and no alignment, you won't achieve as much with those people. By adding these components and focusing on what matters most, you create more value overall. Danaher is an amazing example of tremendous value created by a structured, systematised way of managing a business.

Most mid-size companies struggle with the same things: how do I get the right people in the right seats, build the right culture and engagement, get the right strategy without paying McKinsey or Bain, and execute that strategy and drive accountability? Rather than have them figure it out, we've done the work to say: here are the structured ways to do it, and this is the sequencing that works for where you are in your business. We went and learned from the best — Danaher, Marmon, Constellation, and others — and took the parts of each we liked and distilled them into our own system. Ours probably has more of a focus on people and culture than others, which is a function of where the world is today compared to 20 or 30 years ago when a lot of those systems were started. But it has similar approaches — continuous improvement, strategic planning, KPIs. We're standing on the shoulders of those giants and tailoring it for our types of businesses.

Tracy Britt Cool

More people don't do it because it's really, really hard. It requires extensive discipline, structure, focus, and adherence for it to work. You can't just do a piece of it, or one part, or six months of it — it has to become part of the DNA and the culture. In longer-term holds, people don't do it because of the discipline. In shorter-term holds, if you're private equity, you don't have the time period to get the benefits — why spend two years implementing something you won't reap the full benefit of in year three or four when you need to exit?

For us, having a longer-term horizon, we can invest in that, we see the value, and we have the team to support the discipline and adherence. I also think a lot of investors haven't actually been operators, so it's really hard to go into a business and say, 'This is what you should do to operate' if you've never operated a business. You probably don't have the same insights or understand the value of it. You might have an operating team doing it for you, but at a lot of firms the operating teams are second-class citizens, not at the same seat at the table as the investing organisation.

Tracy Britt Cool

We actually started when we were at Pampered Chef — those were the foundational pieces, where we were learning and trying things, and then we formally codified it when we started Kanbrick in 2020. It has changed a lot, and it gets better every year, every season, every business we work in. It's living and breathing, not a stagnant system you implement and forget. It's focused on continuous improvement, and each company helps us get better.

The mistakes we learned from started very early. At Pampered Chef, we first rolled out KPIs to the entire organisation — 500 employees, everybody. That was a huge mistake. It was too fast, and the organisation wasn't ready. We should have sequenced it, starting with just the executive team in year one; once they understand and are aligned and working towards it, you go to the next level, and then the next. We thought we could move faster because it was a small business.

Related to that, when we rolled out KPIs, we said, 'Great, you have KPIs, go figure them out,' thinking employees would work out how. But you have to help people, teach them problem-solving. Just because you give someone a KPI doesn't mean they understand how to drive it. It's not that they aren't capable; it's just much more effective if you give them problem-solving training and case studies and examples of what it looks like in action.

On the people side, we rolled out 360-degree feedback in year one, where people get feedback from their manager, peers, and direct reports. What we found is that in an organisation without trust or psychological safety, it doesn't work — the feedback is shallow, people are defensive, people attack, it's not constructive. So we realised organisations aren't ready for this in year one. We need to build up to it — build communication, engagement, and transparency, show them we're going to do this, and explain why we're doing development: it's not to exit people, it's to help them with their career progression. By learning those things along the way, we get better.

In recent years, we've realised: simpler, clearer, as concise as possible. Dawson Chambliss, who leads our KBS team, is terrific — a natural learner, always improving the system. After each partnership, we reflect: what went well, what could have gone better, what needs to shift? And we go into businesses and learn what they're doing really well — 'Oh wow, they do that better than us; can we tweak this, can we use it?' We see it in our community of 3,000 owner-CEOs too — we learn how they navigate these topics, and that helps us get better.

Tracy Britt Cool

My view is that mid-size companies are in this middle gap. On the smaller side, startups have accelerators and different programmes. Larger companies have more resources — they can bring in a consulting firm or pay for a resource on a specific topic. If you're in the middle, you're constrained by resources — time, people, and dollars — but you have many of the same challenges to navigate. So we built the Kanbrick community for what we wanted: resources and people to learn from who have done this, made mistakes, learned, and gotten better. By bringing those people together, we share our own resources and experience, and others in the community share theirs. That shared ecosystem of learning and improving helps everyone participate better in their businesses, and helps us as well.

Tracy Britt Cool

We're pretty conservative. Back to margin of safety — if everything has to go well to be successful, that makes us nervous, and leverage is one of those things: the more leverage you put on a business, the more everything has to go well to service it. A traditional private equity firm might put four to six times leverage on a business; we'll probably do two or three times. We might also use a seller note, where the seller helps finance it, which is a bit more friendly than bank debt. Our view is that leverage amplifies returns on the upside, but also on the downside. We want more margin of safety. We don't want to put the company at risk or push ourselves to make short-term decisions because of a structural decision that maybe juices returns a little but isn't best for the business.

Tracy Britt Cool

No, typically not. Most entrepreneurs we meet had a moment where it was a bet-the-business situation, often involving leverage, where they almost lost the whole business. When you've gone through that, as an entrepreneur you're like, 'I never want to be there again.' So sometimes mid-size companies are almost too debt-averse — they won't even have a mortgage on a property or use financing where it might actually be prudent, and they'd rather take equity or more expensive capital, because they're so afraid of something bad happening. It typically stems from something bad happening at some stage, and they don't want to be close to that again — which we respect. If you have a great business, you don't want to put it at risk because of a capital financing decision.

Tracy Britt Cool

We think of AI in three ways. One is at Kanbrick — how do we use it to become smarter, more efficient, more productive in our own processes? That's everything from better note-taking to research on businesses, moving faster as we deep-dive into a space and get smarter as we think about businesses holistically.

The second way is: what are the industries and businesses where AI will affect the industry and potentially strengthen the moat? We're looking at what we call AI-enabled services — businesses where we think AI can strengthen the moat. We're earlier stages on that, because there's a lot of uncertainty about what happens in different businesses, but we're spending time thinking about it.

And the third is in our companies. There are two main ways it can help. One is a structured way to help our businesses think about the key management aspects where they can be more effective. Hiring is an example: we have a structured process — a scorecard, sourcing, selection, an interview process — and if you do it, it improves your odds of success. But it's hard to be disciplined about, because it takes time and stepping back. So can we build a hiring tool that takes away some of the work but lets you still adhere to the process with discipline? Can we build a scorecard for a role more effectively, pull from similar roles and pre-populate it, and make you a bit more efficient as a hiring manager?

The second is our productive workflows. People are starting with the simple stuff — how do I become more efficient, can I think about my call centre — but we're thinking more on the revenue-generating side. We have a business that takes 48 hours to quote. Can we get that down to 48 minutes without sacrificing quality, by using AI more effectively? Are there other workflows on the sales, marketing, or productivity side where we can significantly improve how we engage with customers or make decisions, and speed things up so we can attract or serve customers better?

Tracy Britt Cool

We very much subscribe to the Who process, by Geoff Smart. There's a book called Who, W-H-O. It's the single best simple book on hiring — if you read it, almost everyone becomes a better hiring manager. There are a few components, and we've augmented and added our own.

The first is building a really in-depth scorecard for the role. Most people completely skip this. They jump to, 'I'm going to write a job description, post the role, start interviewing, and figure it out.' People do that because they're in pain — they're trying to fill a role and just want to get going. But you may save time today and lose time down the road, because you're not aligned with your counterparts, you don't market to the right people, you don't interview the right candidates, or you hire the wrong person and then have to exit them, losing lots of time and money.

A good scorecard has three critical components. The first is the mission of the role — clearly, what are you going to drive? Make it specific, time-bound, as measurable as possible. If you're hiring a VP of sales, you might say, 'We want to double revenue over three years by improving our industrial account management and adding large industrial contracts, and we want to build a team of hunters.' What do you want to achieve, by when, and some level of the how? The how is important, because sales leaders are very different — if you're going to sell through Amazon, you need a different sales leader than if you're going to sell direct or through large customers.

The second is the outcomes — three to five really clear outcomes. That might be revenue growth, or growing margin, or improving from four national accounts to ten. As clear and crisp as possible. And the third is competencies — what's needed for this role. We think of competencies on two levels. One is functional: some roles need a certain type — analytical, or relationship-based, whatever it is. And then there are cultural competencies: maybe everyone needs to be humble, or open to feedback, or aggressive, whatever it is for your business.

The scorecard puts those together. The hiring manager builds it and shares it with counterparts and other stakeholders, and then you beat it up. People will say, 'Whoa, you think we need to grow through national accounts? I think we should be going to mom-and-pops.' That conversation happens early, where you get alignment, have the disagreement, and then move forward. Once you have the scorecard, the hiring manager or recruiter or search firm knows what the person needs to do, can find people who can do it, can build a job description that markets to those people, and can articulate it clearly. And then that scorecard flows through the interview process.

The second component is sourcing. Most sourcing in most companies is very reactive — I post the job and people apply. But often the people applying aren't the ones you want; they're the people who don't have a job or are unsatisfied. Your best performers are usually happy in their jobs and doing really well, so you need to go find those people — the hiring manager or recruiter reaching out and taking ownership, rather than waiting for people to come to you.

The third is selection, and how you improve it. This is what most people think of when they think of hiring. Our selection has a few components. First, the hiring manager goes deep on the areas we think are important from the scorecard — the outcomes and competencies — in that first interview. Then we have an interview panel, where different people interview different areas. Most interviews start with, 'Tell me about yourself, tell me about your background,' and 20 minutes later the candidate has had that same conversation with three or four different people. Instead, we say, 'Your job is to interview on outcomes, and that's all you focus on. Your job is to focus on functional competencies — are they analytical, if that's what we're looking for. And one person focuses on cultural.' Your cultural interviewer isn't worried about their past role or their competence on outcomes; they're worried about culture.

We augment those interviews with a behavioural and cognitive assessment, which helps us understand the cultural and aptitude aspects. We usually do a case study — a deep dive on real topics we're facing. And we do a top-grading interview, an in-depth 90-minute to three-hour interview where we go through every past role: what were the outcomes and scope, how did they perform, what would their manager say about them? It's a pretty in-depth process based on Who, but it significantly improves your odds of success.

Tracy Britt Cool

There are a lot of industries we don't invest in — healthcare, financials, insurance, real estate. We want to focus on our circle of competence, where we think we bring new value and expertise. So we focus on services, industrials, and consumer, both by background and where we think there are attractive opportunities.

Insurance can be a really good business, but a lot of capital has come into it in the last 15 years, so it's probably more competitive, with more risk than there's been. There'll be times when it's a really good business, but times when there's more capital, so pricing gets less disciplined and it's less attractive. If we ever found the perfect insurance business, it's not that we wouldn't do it, but it's probably not a focus, given those dynamics and the fact that where we're playing there's a lot of opportunity. Some of these industries are just more complex and the risks are higher — if you misprice insurance, you don't understand your costs for a long time, and you can erode all your profits.

Tracy Britt Cool

Each board I've been on, I've learned different things, both what to do and sometimes what not to do. Some were unique — the CEO reporting to me directly, not a formal board — and others more formal public or private boards.

For the most part, most boards don't add a lot of value to businesses. They often go too deep on areas that are less critical and don't spend enough time on the areas where they can provide the most value. Within each business, really understand the three to five big levers that will shift and create the most value, and spend your time on those, versus all the smaller things that might be urgent and important but won't fundamentally change the direction of the business. The best boards figure out what those are, focus on them, and drive conversation around them, providing insights and value to the management team.

Most management teams come out of most board meetings and say it wasn't a good use of time, because they were just updating and telling the board what they did last quarter, versus more forward-thinking: this is what I'm struggling with. And most boards don't have enough context in the business to add value. So how do you make sure the board is knowledgeable enough and can ask the right questions, even if they're not as deep as the CEO or management team? It's a fine line to get the right balance.

Tracy Britt Cool

Yes and no. There's a public dynamic — a fiduciary responsibility, enhanced governance, and regulated dynamics about where you need to spend time. Some of that is less valuable — earnings and quarterly reports are probably less valuable to value creation. On the private side, people set up boards differently. Sometimes it's more governance and oversight and shareholder management; other times more advisory, for insights. Our view is you probably want somewhere in the middle — some governance, but at Kanbrick we provide most of that, so really it's the valuable insights, perspective, relationships, and introductions that create the most value that we want our boards focused on.

Tracy Britt Cool

In a bad way? Many of them. I remember a board meeting where we were assessing the packaging of the products in detail. The packaging is very important, but I don't know if the board is the best group to be assessing and commenting on it — that's what the management team and marketers should be doing. Or you're on slide 112 of a deck, being read the slides, and it's like, really, this is how we're going to use this time? I don't think any slide deck should be 112 slides for a board. Usually there are 20 slides that get to the heart of the most important topics, and most of the time should be discussion, not presentations.

It's often set up as a dog-and-pony show, where the management team comes up to say all the things they've done and how smart and talented they are and how you should be applauding them, and the board does that on the other side. Versus: here are the three biggest issues we're facing, this is what we're struggling with, this is what we need your help with and want your perspective on. That's a completely different dynamic. You need psychological safety, trust, a management team open to receiving feedback, and board members capable of providing valuable feedback.

Tracy Britt Cool

You can see a lot in a balance sheet. How much inventory do you have? What capital is required? Are your accounts receivable going up or down? There are a lot of insights from all three financial statements, and once you understand the business drivers, you can understand this too.

What you'll typically see is that we assume leaders understand all of that, and some do — fundamentally really well — some understand it tactically, and some understand it in practice but not necessarily the theory of how it actually works. It's really valuable not to assume your leaders understand all of it, because some people are more financially literate than others. It doesn't mean they can't learn it, but if you equip them with those skills, they're going to be better.

Think about a CEO. Often CEOs are great operators who came from sales or marketing or operations. They seldom come from finance. So have they actually learned those aspects, and where along the way? Often in a business you're making really important operational decisions, but also really important capital allocation decisions. You can ruin a good business with poor capital allocation decisions. The big ones — acquisitions being the biggest, where we destroy value by acquiring a business that isn't very good or paying the wrong valuation. But there are capital allocation decisions every day: should we invest in this factory, open this distribution centre, move into this new market?

We think of hiring with the same level of complexity. It's not a capex decision, but if you thought about it as one — if you're going to hire someone for $100,000 a year, and you discount the value of that, it's a million-dollar investment you're making in that person. You can fire them, but you probably won't; they'll stay. So do you have the same level of discipline and rigour in your decision-making on all those topics? CEOs who fundamentally understand capital allocation usually make better decisions. A lot of entrepreneurs do it instinctively — they've had to figure it out — but sometimes just helping a leader step back and understand it matters.

When I started as CEO, we took all our leaders through a business driver meeting and training once a year: what are the business drivers, let's go through an income statement, let's understand all the components. We did it for everybody, because it's something people assume they should know, and if they don't, they often feel embarrassed and don't feel like they should ask. So we'd go through and explain what everything is, because ultimately finance is just a vocabulary and a language that people can understand if it's explained — but if you've never had it explained, it can be tough, and you just need someone to walk you through it.

Tracy Britt Cool

We think of it as a cultural competency. One, you get at it through situational questions — tell me about a time you struggled with something, a time you made a mistake, a time you did the wrong thing — and see what people share. We use our behavioural assessment to get at motivators and drivers, some of which come through as integrity. And we get at it through reference checks, both the ones they provide and ones they don't. The hiring process is fundamentally trying to learn as much as you can about a person and how they'll behave in the role. You don't actually know until they're in it, but you improve your odds by being disciplined.

Tracy Britt Cool

Yes.

Tracy Britt Cool

It can be really helpful to see what people share. In our interview process, based on Who, when you go through the top-grading exercise, I go through each role you've had — your scope, what you did, your outcomes — but then I ask who your manager was, and I write that name down. If you say your manager was Sally Smith, I'll ask what years Sally was your manager and what her role was. And then I'll ask: when I call Sally, what is she going to say about your biggest strengths, and about your biggest development areas? Just shifting from 'if I call' to 'when I call' changes what people say — they're more honest. And by writing down Sally's name, I now know who your manager was; often you don't know who someone's manager was, so you couldn't even get to it. Getting people to be more direct and forthright is a way to get some of that out. And ideally you verify it — have those conversations and see if what they said and what Sally said match up.

Tracy Britt Cool

By and large I think people want to do the right thing and are trustworthy, but people have blind spots about themselves. As they're talking, they want to impress you — it's a bit like dating, where you're putting your best foot forward. We want to disarm people and get them to be as honest as possible, because sometimes you can be a great, talented person and just not be the right fit for what we need in this role. So we try to get people to be upfront and honest, and ideally screen out those who perhaps aren't. Our view is we want to help everyone find the right role and fit for them.

Tracy Britt Cool

We love to keep a talent bench — people we've interviewed, and people we just know and think are impressive, that we can reach out to if we have a certain role or geography. It's a great way to cultivate talent and see opportunities. We'll get to know people, and a year or two or three later there might be a role we work on. I always say life is long — people come back in and out of your life in different ways. When you meet really great people, you try to keep them close, because great people — not only from a cultural or integrity perspective, but also from a competency and capability perspective — are rare to find in that combination.

Tracy Britt Cool

There are too many to tell. We've talked a lot about long-term. One thing Warren always said to the CEOs is: think about this business as if it's your family's only asset and you can't sell it for 50 years. Make decisions with that in mind. That embodies true long-term thinking. Maybe you're not going to think about every business for 50 years, but it's something I think a lot about.

I learn through those types of examples and stories, like most of us do, so trying to remember them is really valuable. Or Warren's comment on reputation: if he loses money, I'll be understanding, but if he loses his reputation, I'll be ruthless. Or the newspaper test: if this were on the front page of the newspaper, written by a fair, critical reporter, and your family would read it, how would you feel about it? Things like that always stand out to me.

Tracy Britt Cool

A few things. One, when we think about businesses — and this goes back to the moat — we try to find ones that are a bit more insulated from inflation, because they can usually pass it on to customers. If you have a higher-quality business with a moat, you usually can pass on inflation, so it's less of an issue. Second, with our businesses, even if there is inflation and we don't want to pass all of it on, how do we improve productivity to combat some of it? We think most businesses can improve productivity 2 to 5% a year, every year, just by being disciplined. That's a way to counter some of the impacts.

You also think about your new investments — what it means for your willingness to pay, and it ultimately translates into interest rates. Those are all things we factor in. That said, I've never been a macro investor. It's hard to predict the macro and hard to invest based on it. I'd much rather focus on the fundamentals — finding high-quality businesses at reasonable valuations with good dynamics — and then you can absorb more of those dynamics like inflation or tariffs that will inevitably happen at some point.

Tracy Britt Cool

Quarterly reporting, especially in public markets, is a net negative for companies and investors. It's intended to provide transparency, but it ends up driving short-term thinking — what am I going to do to drive the results this quarter? You see it all the time: I'll move sales into this quarter, offer a discount if you buy this quarter, I need to hit my number, or I'll invest in something I can do this quarter or next to achieve it. It fundamentally doesn't support what's best for the company or the investor.

That said, you want someone managing the business more frequently than every six months or every year. If you only look at your financials and performance once a year or once every six months, you'll miss opportunities to make adjustments. But you don't necessarily need investors to do that, if you have the right management team and confidence. The challenge is: if you don't have the right management team, are you getting visibility into that and how to navigate it? I'd probably err on the side of not having quarterly earnings, because of all the negatives — but you've got to solve that other issue of whether you're managing the business closely enough.

Tracy Britt Cool

Of course. If you look at Danaher — that business, Mitchell Rales and Steven Rales, and ultimately the CEOs who followed — is remarkable. Both the performance and how they've done it, their system. I have a lot of respect for them. Nick Howley of TransDigm — the performance during his CEO tenure was significant, remarkable, and he had his own business system for how he did it. And people I have tremendous respect for from what they've accomplished — Bezos building Amazon is incredibly remarkable in terms of the impact it's had on the world. I learn a lot from people who have come before us in how they manage.

The pressure is a lot for any CEO, especially public CEOs right now, in terms of what they're expected to have a view on, what they're expected to manage, and the consequences of those views. It's particularly challenging for those in the public view.

Tracy Britt Cool

I don't think there's a right or wrong answer. You need leaders who are authentic and genuine. If they're people who have views and want to share them, and that's key to who they are in the business, I can understand why they do that and the benefit of it. That said, we're in a very divisive time, and sometimes people have a lot of views and assume their customers have the same views, and there are businesses where that may not be the best approach.

By and large, my approach is that CEOs should be really thoughtful before having views on topics publicly, especially topics where their customers or employees may differ. But if it's a founder with strong views, I don't think they necessarily have to cover those up. So it's a bit of an 'it depends' answer, which feels like a cop-out.

Tracy Britt Cool

Success for me is really leaving things better off than I found them — both the companies I work with, the people I engage with, and my family. Building my own life and the lives of the people around me into something great that they care about, that's special and impactful, and that's creating value for them and for those around them.

Tracy Britt Cool

Of course. Thanks for listening and learning with us. Until next time.