My Guest
Back by popular demand, for his second tour of duty on the podcast, is Brent Beshore. Brent is the Founder and CEO of Permanent Equity, a private investment firm that invests in Founder-owned small to medium sized businesses. They are a (very) long-term investor that looks to hold portfolio companies indefinitely, often without the use of any leverage.
In addition to his role as an investor, Brent is also a prolific writer: He is a regular contributor to Forbes, and is also the author of The Messy Marketplace, a book that aims to demystify the process of selling a company.
Beyond his commercial acumen, one of the things that I most admire about Brent is how he takes a deeply personal approach to his work, utilizing tools and frameworks from disciplines like philosophy, psychology, and religion to inform how he thinks about conducting himself both personally and professionally. This is one of the reasons why a seemingly black and white conversation about investing went into domains like fear of failure, the source of our identities, and why young professionals ought to demonstrate more vulnerability, among other topics.
My first conversation with Brent, published in November of 2022, was one of our most highly rated episodes, and something tells me that this one might even top it.
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An Investing Masterclass with Brent Beshore – In The Trenches
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Specific Questions and When They’re Asked
3:24 – Brent Beshore Joins the Show
Brent discusses his return to the podcast and introduces the shift in focus from his past experience as an operator to his current role as an investor.
4:18 – Thoughtful vs. Overthinking in Investing
Steve asks Brent if a long list of detailed questions indicates an engaged investor or an unfocused approach. Brent shares his experiences about refining his questions as an investor.
6:41 – Industry Trends and Business Nuances
Steve and Brent discuss industry trends, the importance of identifying key indicators within business models, and how these nuances impact investment decisions.
9:26 – Balancing Detail Orientation as an Investor
Steve shares his struggle of being detailed-oriented as an investor, influenced by his previous role as a CEO. Brent encourages him to lean into those strengths and shares how his operator background continues to influence his investing.
11:23 – “Price Is My Due Diligence” – Buffett’s Influence
Steve asks Brent about the famous Warren Buffett quote. Brent shares the story behind that quote and how it was rooted in his dinner conversation with Buffett.
16:01 – Risks and Falling in Love with Deals
Steve asks about Brent’s perspective on managing risks without falling in love with a deal solely due to an attractive purchase price. Brent emphasizes the importance of understanding risk mitigation versus elimination.
17:04 – Deal Breakers
Steve asks Brent about disqualifying risks when considering an investment. They discuss seller integrity as a significant factor, and Brent elaborates on how challenging personalities and ethical concerns can still be managed with the right structures.
22:30 – Portfolio Construction at Permanent Equity
Brent talks about Permanent Equity’s approach to portfolio construction, balancing conviction in individual investments with diversification for resilience.
24:41 – Avoiding the Trap of Busyness as a Firm Leader
Brent shares his strategy to remain “always useful, never necessary” in his role at Permanent Equity and the importance of spending time thinking as the firm grows.
28:06 – Concentric Circles of Commitment
Steve asks Brent about how he allocates his time. Brent explains his framework of concentric circles of commitment, starting from his marriage, family, friends, and extending to new opportunities.
30:23 – Breaking Rules in Investing
Brent explains his evolving view on rules in investing, noting that experience has allowed him to move away from rigid rules in favor of more nuanced, case-specific decision-making.
33:47 – The Role of Checklists in Investing
Brent elaborates on the role of checklists, explaining that due diligence and investment sanity checks are part of a comprehensive evaluation rather than separate lists.
37:28 – Culture and People at Permanent Equity
Steve asks Brent about the importance of culture in his firm. Brent highlights that Permanent Equity is an extension of who he is and emphasizes the significance of culture and people in business success.
40:44 – Tying Identity to Business Success
Brent speaks candidly about the challenges of detaching one’s identity from business performance and shares how his faith helps him maintain a healthy perspective.
43:24 – Investing First Principles
Steve introduces a segment focusing on his personal “investing first principles,” seeking Brent’s insights and feedback. This section delves deep into Steve’s thought process for evaluating potential investments. Steve presents a series of principles, or “quick sanity checks,” and Brent provides his perspective on each one.
- 43:50 – Principle 1: Is the Industry Large and Growing?
Brent agrees with this foundational question but adds nuance, emphasizing the importance of evaluating the specific segment of the industry and whether it is experiencing sustainable growth or short-term hype. - 44:45 – Principle 2: Does the Company Have Pricing Power?
Brent shares his thoughts on how pricing power can indicate a company’s value to its customers. He explains why it is essential to understand what drives pricing power—whether it is brand loyalty, product differentiation, or market inefficiencies. - 46:10 – Principle 3: Are the Margins Above Industry Average?
Brent discusses the relationship between margins and value creation. He talks about how above-average margins can be a sign of a competitive advantage, but they also require deeper analysis to ensure they are sustainable. - 47:30 – Principle 4: Is the Entry Multiple Attractive?
Brent offers his perspective on the importance of price in investing, reiterating his earlier point that “price is my due diligence.” He discusses how the entry multiple must be evaluated in the context of the business’s quality and growth potential. - 49:00 – Principle 5: How Strong is the Management Team?
Brent stresses the critical role of the management team, sharing how he has seen both strong and weak teams impact the success of an investment. He provides examples of what qualities he looks for in leaders. - 51:00 – Principle 6: Is There a Moat?
Steve and Brent discuss the concept of an economic moat—whether the business has a defensible competitive advantage that will allow it to maintain profits in the long term. - 52:30 – Principle 7: Personal Connection to the Deal
Steve asks Brent about the emotional aspect of investing—whether a personal connection to a deal is a valid criterion. Brent shares his view that passion can be valuable but warns against letting emotions cloud judgment.
Download a Written Transcript of Our Conversation
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