I think Uber is the most incredible business ever made:

Facts about cars:

  • The average car has a utilization rate of 4%, or roughly 1 hour out of a 24 hour day
  • There are 260MM cars registered in the United States.
  • Assuming an average value of just $5,000 per car — truly a WAG — American cars are collectively worth $1.3 trillion. (~50MM cars were sold in the last 3 years, which make up a substantial portion of total car values.)


  • Increasing car utilization to 20% from 4% could theoretically result in 80% fewer cars in the U.S.
  • This would free up approximately $1 trillion of capital currently tied up in mostly dormant vehicles across the United States.

Any large improvement in utilization rates will undoubtedly require something like Uber (car-as-a-service) plus driverless capabilities. But I really do think this the future.

Already, Uber has had a tremendous impact on at least one industry. Guess which one?

After growing at a 9.5% CAGR from 2007-2014, the outsize economic returns earned by the beneficiaries of a government-sponsored monopoly have declined precipitously to 2016. The world is better for it.

Crazy predictions:

  • The Big Three are living on borrowed time. Legacy costs (pensions) will be spread over fewer new cars produced.
  • The glory days of car insurance are behind us, as the combination of safer/fewer cars will result in substantially less risk, and substantially lower car insurance premiums/capita.
  • Car insurance could theoretically be managed via gas tax, as once argued in the book Invisible Bankers, reducing SG&A in car insurance and resulting in lower total premiums.


Not too long ago I told you I invested in a gym run by a friend. As of this week, I’ve effectively sold out.

A group of well-financed individuals wanted in, and I couldn’t help but see the opportunity to realize a gain and move on. The terms were frankly too good to pass up.

With the deal closed, I have:

  • Locked in a gain – I’ll lock in a decent gain on my investment in the gym.
  • Created an option – In addition to realizing a cash return, I’ll also retain a 10% stake going forward, which has an unknown value. (My model is extremely sensitive, due to the inherent operating leverage in the business.)

My reasons for exiting were as follows:

  • The gym is getting a capital infusion that, in my view, funds increased capex and opex in excess of existing demand, which will result in diminishing returns. I see it as unnecessary. But I am willing to concede that my desire to avoid “cosmetic” investments may have been a big blindspot in my thinking — time will tell.
  • The new biz plan will increase operating leverage, which is — again, completely my opinion — unnecessary given already attractive economics with low operating/financial leverage. (In general, I’m of the view that great returns don’t need to be turned into legendary returns if it induces blow-up risk. Too many people are willing to risk turning 25% CAGRs into zeros by getting greedy.)
  • The new investors are independently wealthy due to another venture, and seemingly less interested in economic returns on capital than I am. Furthermore, I believe they may have a bias toward reinvestment, which, in light of a decision to increase capex/opex ahead of demand, worries me. (Fear the landman in every industry.)
  • There will be other opportunities to deploy capital when unemployment is significantly higher than 4.8%, and the cycle is closer to a bottom than a top. This isn’t a macro call, but if you think available investment opportunities are better in 2016 than they were in…say, 2011, please tell me where you’re sourcing ideas!

In short, this exit allows me to:

  1. Realize a cash return.
  2. Hold an option for potential upside in the event this becomes a home run, with no additional committed capital from my personal balance sheet.
  3. Be location independent once again — Charlotte, NC is calling me.

On the industry

In all, I tend to think service-oriented group fitness facilities are excellent investments as they:

  • Generate more revenue per member.
  • Displace capex with opex, which is beneficial in bad economic environments.
  • By my observation and belief, result in lower customer acquisition cost in dollars and cents, and as a percentage of revenue, due to an emphasis on partners/groups.
  • Win customers at the margin with friendly terms (no contracts!) afforded by higher revenue per member.

There are only five figures that matter for the gym industry:

  • CAC – Cost of customer acquisition.
  • Churn – Percentage of members who quit in any given month.
  • Cost per attendance – The best gym members pay, but never show up. (Surely some gyms measure capex/opex divided by attendance over x periods?)
  • Revenue per member – Obvious.
  • Asset turnover – $1 in annual revenue against $10 of equipment is awful, for example.

In the future, I think the gym industry will:

  • Become more corporate, with fewer mom and pops.
  • Develop black-and-white lines by pricing tiers. (Planet Fitness at the bottom, 24/7 in the mid-tier, and independent group studios and barbell clubs at the high end.)
  • Provide lumpy, cyclical returns due to inherent competition, and limited entry/exit barriers.
  • Eventually become part of the health insurance complex, resulting in outsized profits for a chosen few.
  • Remain a playground for roll-ups. With unlevered FCF yields >20%, small time operators can easily run serious PE-style roll-ups in local markets.

On private companies

In my view, private companies:

  • Are way more attractive as investments than public companies.
  • Should be valued with the understanding that, in my cases, you’re buying a job. (Assign a multiple only on profits in excess of your reasonable salaried income across a cycle.)
  • Trade at ridiculous discounts, especially to public company multiples today, even after considering liquidity, cyclicality, etc.
  • Are way more likely to generate FU money.
  • Do not fully appreciate the importance of incentive compensation for employees in the way that public companies do.

Would I invest in another private company? Yes — send me a term sheet!

In all seriousness, I’m willing to invest in probably any type of private company provided that it is relatively simple to understand and there are public comps by which I can get some sense of potential inefficiencies. (I’ve seen enough filings to know that a 50% food cost or 40% labor cost for a restaurant is garbage, for example.)

But, that said, I think my bias is that private companies are most attractive to public companies when there are inefficiencies. I don’t want a top-quartile private company; I want a bottom-quartile private company that needs some TLC. The power to effect change is invaluable for any investor in any company.But, again, that’s just, like, my opinion, man.

I’m semi-tempted to start browsing Biz Buy Sell with more tenacity. Would it be wrong to get a boilerplate document to spam for company financials? Good way to solve an insatiable curiosity…maybe?


View post on imgur.com

Howdy, ya’ll!

It’s been awhile. So long, in fact, that I learned the word “y’all” from these crazies in South Carolina.

Here’s a life update FAQ.

I moved to South Carolina. I’ve since learned (“learnt”) the word “y’all.” Truth is, South Carolina is something awesome, given that it’s been 60+ degrees in every day since February.

Yup. I moved here to open up a gym with a friend.

Dude, gyms are a lame investment.
I know, man.

Here’s how it happened: A friend called me up and said he had a sweet biz idea but didn’t have any money. I told him I had no ideas, but I had plenty of money.

So we worked out a deal after drinking way too much and creating a rudimentary model.

It may be the best business I’ve ever seen. I think I bought it at 0.5X 2017 EBIT. I’ll sell it at some multiple several times higher than that to any interested party. 😉

Sidebar: I’ve thought about reviving this blog to discuss private equity investments. Comment if that interests you. Truth is that small business is the best investment. As for the gym, I have the world’s best operator in a commodity business (a license to print money).

What about stocks?
I mean, you can pay too much if you want to. I think that’s your only choice right now, unfortunately.

I’m net neutral. Long and short in equal quantities, plus or minus a few percentage points. Comment here. I’ll email you. I can be more honest that way. I won’t name these companies given a couple of them want me dead.

I run a concentrated portfolio, but recently the movements of the market have been unimportant to my net worth. My recent investments have more to do with finding the truth than making money.

What else is new?
Not much, really. Amused by the current hunt for yield.

How about some fun stuff?
Uh, I’m currently in Omaha with the crazy dude from FinancialUproar.com. I met with Steve from Steveonomics.com, too. Personal finance people are weird, but they’re honest about it. I feel like I spend way too much given how little they spend. Good on them!

Still in Omaha for another ~24 hours or so if you want to meet up.

What’s next?
Retiring on the beaches of Charleston, SC — sooner, rather than later. I’m basically retired*, but I’m not going to write some silly retired-at-26 blog.

Thing is, I feel like writing about being retired is a good way to make sure your money never lasts long enough for you to retire. Karma, or something.

* Does not require Thailand-level living expenses. That stuff doesn’t count.

You didn’t sell out…
…Like the other guys who run PF blogs? No, I didn’t. I really do value conversing with all of you. We all sell out in different ways.

Email me. I prefer private discussion, but comment as you wish — if at all.

But, really, I’d rather chat with you all than blast this place with ads.

Want to chat? Comment here. I need to fix the email forms. If you made it this far, I want to talk to you.


(I wasn’t paid for posting this, nor do I have any economic interest in you opening a credit card. I actually think this is a sweet deal worthy of your time. Nice guy blogger.)

As I sit here, I wonder if I really need another credit card. I don’t. I have several, many of them the casualties of rapid churning.

It was fun for awhile, but I’ve exhausted most of the offers out there. And now I’ve got something close to $100k in limits I’ll never use — I live on less than $20K a year.

Despite this, I opened another credit card last night. Why?

Free money, yo!

Bank of America has an offer that’s hard to beat. The BankAmericard will give you $25 per quarter just for paying your bill on time with a payment greater than your minimum payment. There are no other rewards, nor an annual fee.

So what do you do?

1. Set up an automated bill
2. Set up an automated payment on the BankAmericard
3. Every 3 months get $25 in cash, tax free!

Adverse selection in action. Customers like me are certain to be unprofitable — but, hey, that’s not my problem.

Anyway, if you’re interested in taking advantage of this deal, check it out here.