Tracy Britt Cool: On Working for Warren Buffett and Building Great Businesses

KEYPOINTS

• 01

  Buyout value is shifting from financial engineering to operating, so investors need operating experience.

  The old model was to buy at 7–9x, make small improvements, and sell at 10–12x. US private equity has grown from about 20–25 firms in the 1980s to nearly 20,000 by 2020, so capital is a commodity and sellers capture more of the value up front. The returns now have to be created after the deal. That's why Cool, after about five years as Buffett's financial assistant at Berkshire, left the boardroom 'for the war room' to run Pampered Chef.

• 02

  Thinking long-term has three parts: the mindset, a structure that allows it, and a chosen horizon.

  If your structure forces a sale in three to five years, every decision bends toward cutting costs and raising prices now rather than entering new markets or developing talent. Long-term also isn't all-or-nothing: 50 years is one end, and a middle horizon gives flexibility. You still have to manage the short term. At Pampered Chef, focusing on international expansion and new categories in year three caused a setback until they went back to the basics of selling.

• 03

  Companies fail to adapt because change is speeding up and leaders who grow up in one industry lack outside perspective.

  COVID, tariffs, supply chains and now AI keep coming, with many false starts, while managers are busy with customers and product. Deep expertise in one field can blind leaders to patterns that played out in other industries. Kanbrick tries to help leaders 'see around curves' by pointing to those analogies.

• 04

  Turnarounds take longer than you expect, which is why short holding periods hurt them.

  After advising Pampered Chef for a year, she expected the fix to take one or two years. It took three or four. Getting the team, culture, systems, marketing and product right all took longer. If she'd had to sell in three or four years, she says, she would have made shorter-term choices that created less value.

• 05

  Start with people, then purpose, then performance, and give people the same calendar discipline as budgets.

  Most companies have a calendar for strategy, KPIs and budgets but none for talent. Her three people buckets are attract (hiring, employer value proposition, critical roles), develop (career paths) and engage (culture, incentives, communication). Mid-size firms often have only a junior HR generalist, so all of this falls on the CEO, and the CEO can't hold the culture together personally once the company grows.

• 06

  Most mid-size companies have 15–30 critical roles; identify them and assess who's in each one.

  Which roles matter depends on the business: sales, product, finance. Sometimes a critical capability is missing entirely, as technology was at Pampered Chef. Her biggest interview warning sign is 'hand waving': drift and vagueness when you probe. Strong people explain their area crisply and have views beyond it. One question she likes is 'What are we not doing that we should be?'

• 07

  Kanbrick evaluates deals with five Ms: moat, market, management, more potential and margin of safety.

  She reviews about 500 companies to invest in one or two a year. The moat should show in returns on capital and also be explainable qualitatively, because newspapers' numbers looked fine long after their moat began to erode. 'More potential' means value not yet tapped, like a new region or a dealer network. 'Margin of safety' means the deal works without everything going right, so COVID or tariffs don't force short-term decisions.

• 08

  Use EBIT and true capital to measure return on capital: about 20% is okay, 50% or more is great.

  She prefers EBIT to EBITDA because depreciation and amortization are real costs in most industries. Capital includes PP&E, receivables and inventory, so a business with big inventory needs is worse than its earnings suggest. Low-capital businesses can be easier for competitors to enter. AI is making tech capital-heavy, which may itself become a barrier.

• 09

  AI will erode many moats but may strengthen some.

  Lower friction helps new entrants. Businesses with hard-to-copy assets, such as credentialed or regulated work, or large sales and technician networks, can use AI to cut costs or quote faster and pass the savings on to customers. The open question is whether AI-driven savings in services become a race to the bottom where customers keep the gains.

• 10

  Most boards add little value; they should spend their time on the three to five big levers.

  She has sat through board meetings that critiqued product packaging and decks that ran to slide 112. Her alternative is about 20 slides and mostly discussion of 'the three biggest issues we're struggling with', which requires trust, psychological safety and board members who understand the business. She calls quarterly reporting a net negative for companies, while still wanting management to review results often.