Hello!
It’s been a long time since I last sent a newsletter or written a blog post.
You’ll find that much of this edition talks talks about industrials, as that’s where my interests lie these days. If you’ve got interesting links to share here, especially as it relates to M&A, I’d love to read them!
Industrials
The largest opportunity for young people globally is in industrials (energy, mining, manufacturing). If this is something that you’re interested in, do reach out! I’d like to chat with you about this.
It’s fascinating to me how broken billing is at American utility companies. There is probably a case to be made for a new billing solution that a) doesn’t frustrate end-customers, and b) saves billing companies from hours wasted figuring out why X payment doesn’t reflect on Y statement or why a customer was charged twice for something.
It’s also interesting to me that while utility companies like PG&E can go bankrupt, they’re not really allowed to fail or shut down because it’s such critical infrastructure, but no one is willing to acquire them either? (Maybe the problem isn’t that they’re not willing to be bought, but more-so anti-trust issues…) This is also interesting in light of all the bank failures. When too many banks fail for a competitor to buy them up, what happens?
While I firmly believe the largest opportunity is in industrials, I think the hardest challenge for anyone in the space is training and maintaining trades talent. I think there are some that would bring up the difficulty of even hiring and maintaining management talent, but I think this issue is more manageable compared to trades talent.
Speaking of the above, Eric Smidt, billionaire proprietor of Harbor Frieght Tools (not to be confused with Eric Schmidt of Google fame), is directly funding skilled-trade teachers at public high schools to train students for careers in welding, construction, auto repair, plumbing, electric or manufacturing. https://www.forbes.com/sites/laurendebter/2023/04/28/a-billionaires-quest-to-fund-welding-automotive-and-construction-classes-in-public-high-schools/
This is a great example of when business incentives really align with community needs. Not only is he helping hundreds (thousands?) of academically struggling students build skills for a career path, but he’s also adding to his future customer base.
The TSMC complaints about operating factories in America https://www.nytimes.com/2023/02/22/technology/tsmc-arizona-factory-tensions.html
Some commentary on the Chinese manufacturing labor force
A quick article about the largest failure of a PE-backed LBO https://www.fool.com/investing/general/2015/05/23/txu-to-energy-future-holdings-how-the-biggest-leve.aspx
Supply chain fragility: US defense edition https://www.wsj.com/articles/the-u-s-military-has-an-explosive-problem-6e1a1049
Dangote Cement, Nigeria’s largest cement producer, has insane profit margins https://businessday.ng/amp/companies/article/cement-war-dangote-beat-industry-peers-with-61-gross-profit-margin-in-9m21/
A thread on EVs https://twitter.com/egreghost/status/1651790747790725121
Other notes
It’s surprising to me how big of a problem finding CEOs in the search fund space is? I thought that most searchers would run the companies they acquire, but they bizarrely don’t.
Some thoughts on the China-America hostility:
I consume a lot of Chinese media because I'm learning Mandarin, and even in scripted television shows, to establish character legitimacy, writers still turn towards US accomplishments to measure a character's success. E.g. X character went to Harvard, brokered large M&A deals in the US, rings the NASDAQ bell, works for a successful US private equity group, etc.
Even in Korean shows I often find that the audience respects a character's accomplishments more if their accomplishments came from the US more than any other country (and thus, the writers' inclination to give a character such background to establish excellence).
Chinese hostility towards foreigners in scripted television shows (to create tension) usually stems from conflicts where those foreigners disrespect Chinese culture in some way, and it's never written to explicitly be about anything political, at least from what I've seen. And if conflict with foreigners is written into the show, it's not just limited to Americans. I actually can't think of the last particular instance where the conflict stemmed with Americans, as it's usually been with Europeans (especially the French lol).
The younger Chinese love the west and its status symbols, particularly the cultural ones (fashion, travel, cars, etc), and wealthy parents love to send their kids to America to learn. I know many instances where both unbelievably wealthy and even poor immigrant Chinese adults choose to live in the US and find the quality of life here far better.
I overall think the narrative is stronger than any genuine hostility or hatred. Someone framed it better than I: “the Chinese probably admire Americans very much, but they are upset by the feeling that Americans do not like them so much in return.”
America has its problems, but I think Americans take for granted how good it is to live here compared to most other countries, by all sorts of measures. I’ll perhaps elaborate on this far more in the future, but merit genuinely does take someone very far here, further than a lot of other places that heavily rely on status symbols, and/or destroy the ambition of someone wanting to do great things.
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