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- [00:00]
A
How hard is it to make a washer?
- [00:02]
B
I thought it was easy too, until I, until I started doing it. I would have these obsessive conversations with people. They would literally look at me and they'd be like, you're talking about things in a way that nobody talks about. Go see how the end product is manufactured and assembled, go see how a plane's made, go see how cars made, and you'll understand what business you're in in a much better way.
- [00:22]
A
Founders are not great CEOs is what they say.
- [00:24]
B
You want to be really successful. Don't bank on herculean change. We're not looking to make incredible strides in one single. We're looking to win every single day. I spent the first 10 years of my career in jobs that most people listening to this podcast would never think of taking. And I think I actually have some gray hair as a result of that.
- [00:46]
A
SpaceX Blue Origin. The flavor of the decade seems to be space right now. Is that market going to just continue to explode? One of my best friends in the whole world. We've done two episodes, 11 and 52, where this will be like 4 14. So there's been a gap. A lot has happened that we're going to cover. But we're going to start on one of my favorite quotes that you say over and over at YPO forum. You can't out manage a bad capital structure. When you say that, what do you mean?
- [01:24]
B
I've seen so many businesses to this point and a lot of these are great businesses, not necessarily ones that I own, but you know, businesses that have good end markets, they have good customer bases, they have, you know, generally a good strategy. But you know, where people go wrong is, you know, they just try to get too much out of the balance sheet. And you know, the one thing I've learned is that if you really have a good business and you believe in it, you know, putting equity behind it is essential. You can always modify your balance sheet, you know, depending upon the stage of the business, the size of the business, what's going on in the market. But again and again I see, you know, particularly lower middle market private equity. And there's, there's nothing wrong with this, but they're trying to stretch the check size of the equity that they can deploy. And that puts very good managers in really bad situations a lot of times. So a lot of times you have people who are really up against unfathomable situation or a situation that they've never been in, which is managing covenants and ratios and Things that just, you know, it's not necessarily. Those aren't bad to manage. It's just when it constrains the business. And if your job is to manage a business, that's what you should be doing. If your job is to manage a balance sheet solely and a banking relationship, then that becomes those two things that can come into conflict.
- [03:11]
A
Are there multiple examples of what stretching a balance sheet looks like or is it usually just over leverage?
- [03:19]
B
Yeah, a lot of times people make assumptions that they'll be able to fundamentally change a business whenever they invest in it. So a lot of times when people are underwriting an investment, they'll make an assumption that they'll be able to reduce the working capital profile of a business by 25, 30, 40%. They need to ask themselves why. Right. Like, it's a very fundamental question. Because it's a big assumption that you're making. Well, we'll be able to operate the business better. Why is that? And a business has a working capital profile for a reason. Right. You need to understand why the business has that profile. That's a simple question that you should just ask about any business that you're investing in or that you're getting involved in. The over leverage is just a fundamental decision. It's working towards some sort of underwritten IRR or MOIC or however you're modeling that business out. Two are very distinctly different, but both take place in the underwriting stage. And a lot of times those take place without the presence of who's going to be running the business. Right. So I don't think that those things should be done in isolation. And I think a big part of our success is that, you know, we are managing our business, but we're also doing the underwriting and making sure that we can live with what. With what we're buying, how we're buying it, and how we're structuring the balance sheet.
- [04:59]
A
Obvious question to say, like, how do you underwrite a business differently than most of your peers or most of your peers that get it wrong? Like, what are the. How many businesses have you bought now? 25?
- [05:09]
B
Yeah, a little bit more. Maybe 20, 27, 28, depending on how you slice it.
- [05:14]
A
So, like, how's that. How's that underwriting changed over time? Or how have you found your sweet spot?
- [05:21]
B
Well, we've gotten a lot better at it. I mean, we've. When you've seen, you know, one deal or one opportunity, you've seen one deal or one opportunity. Right. But you do see analogs and corollaries to, you know, different businesses that you're looking at and underwriting. So I think there's no magic bullet or secret sauce that makes us better than anyone else. I do think we have looked at so many different dimensions of business. We understand what levers we can pull within that business and which ones we can't. So it's just like anything else. If you're going to have a successful outcome, you need to understand very clearly going in these are the highest probability things that I can change in a very short period of time. These other things may or may not happen. So we're not going to underwrite them, but those will be upside. And I think we are pretty disciplined about that. I mean, we know exactly what we're looking for. We know, you know, with a great degree of clarity how much we can pay for those deals. And that's why we've been successful. It's when people think that they can do Herculean things and, you know, turn water into wine, perhaps, that they fail.
- [06:48]
A
Is it generally speaking, like Herculean changes kind of is a. Is like fiction. Like it happens every so often, but it's nothing you ever bank on.
- [06:57]
B
Yeah, no, I mean, if you want to be really successful, like, don't bank on Herculean change. If you wanna be successful, be very patient and go to work every single day. Yeah, right. And yeah, I mean, it's, it's, it's, you know, incremental progress and change is very powerful. And those things compound over time.
- [07:16]
A
Here's something I think about a lot. Everything in our lives compound. The businesses, the investments, the relationships we all put work into. But time doesn't. You spend it once and it's gone forever. That's a big part of why people fly with airshare. Airshare is a fractional ownership program. You own a share of the plane and it's there when you need it. They run their own fleet. Their pilots are trained to the highest international standards. The crew stays with you the whole day. And the model runs on days, not hours. So you can pack a day with as many stops as you need. No peak day fees, no fuel surcharges, no nonsense. You drive up to the fbo, walk on and go. If time is, is the asset you're actually trying to protect. Go check out airshare@flyarshare.com. that's flyarshare.com.
- [08:07]
B
and so, you know, we're not looking, you know, to, you know, make incredible strides in one single day. We're looking to win Every single day. Right. Like a win the day. Like, what does that look like? Well, it's simply doing things better than you did the day before. And I don't care if you're running a business or if you're going through life, your objective should be to wake up and figure out what your day is going to be like and what you need to do to win that day, however that looks to you. And so that's what we do within our business. It's just simply doing better than we did the day before and knowing that we're going to have to do that 250 days a year because we don't necessarily work on the weekends, maybe more, maybe less. And that creates success.
- [08:55]
A
What comes to mind when I say, what are levers that you can pull in a business when you're the size you are now?
- [09:03]
B
Spoiler alert.
- [09:04]
A
But it is public. You sold for multiple billions recently to arcline. You used to own. I remember when you just owned. Was it Weatherford was the first one?
- [09:13]
B
Yeah, I mean, we had a business before that, but substantially, Weatherford was.
- [09:18]
A
So what are the levers you can pull it this size now that you couldn't pull back then, or is it always the same?
- [09:25]
B
The levers that we can pull are certainly more because we have scale, right? So we have access to, you know, cheaper capital because that's, that's what you get with scale. We have access to a much broader customer base. So if we want to, you know, look for growth in an area that we didn't have access to 10 years ago, with a smaller or singular business like we have, we have the ability to pull on that lever. You know, scale for the sake of scale isn't good. But whenever you couple scale with diversity, when you couple scale with, you know, innovation and great products and a good commercial strategy, and, you know, where your econometrics lie relative to the strength of your pricing power, those are, those are all levers that you, that you have that you didn't have when you were, you know, subscale. You don't necessarily, like, exert leverage on your supply base unless you need to, but you have a lot more power with your supply base whenever you're at scale versus a singular business. So, yeah, I mean, I think the levers are numerous. It's just understanding which ones you need to pull, why you need to pull them, how you're going to pull them. Because it's like anything. If you just go back to the same lever or the same, well, you know, time and time again. You know, you're going to become stagnant. You're not going to, you're not going to push forward and you're not going to win the day. So I would say at our disposal, we have dozens of levers that we didn't have 10 years ago. You know, we have dozens of levers that we didn't have five years ago. But that's a byproduct of winning every single day at whatever scale we were at that point in time.
- [11:15]
A
Okay, now would be a good time to just remind what is your strategy? What are you, what is Navarria doing?
- [11:21]
B
I mean, ultimately we're improving the aerospace and defense supply chain. Okay, Right. And we do that by, yeah, we do that by acquiring second or third generation businesses, many of which are family owned or, you know, have gone through their first institutional stage of ownership. And we improve those businesses by investing in them. Right. We, we invest in those businesses through, you know, human capital. Right. It always starts with people. So we are very thoughtful about making sure that we have the right people on the bus if we need to add, you know, some folks. That's great. We invest in that business through engineering, through innovation, coming up with new products, designs, material science. And then, you know, ultimately those investments, whether it's, you know, capital, human capital or innovation, yield growth opportunities. And so then you grow the business. So our strategy is really quite simple. It's like we're taking existing, you know, businesses, making them better, and then redeploying that capital or that gain to buy more businesses. And that's how you compound. I know this is like a really, these are really, really simple concepts, but they're hard, but they're very hard because just people, there's a discipline again, just to, you know, grinding that, you know, the banality of grinding is difficult for people to, to wrap their head around because it's not easy because it's daily, you know, so our daily discipline really results in, you know, what's been built, which is, you know, a snowball that just so happens to service the aerospace and defense market. Our strategy is not built around some sort of newfangled AI technology. Right. Although I think that's, that's fascinating and it's going to fundamentally change a lot of things. You know, our strategy is built around, hey, I'm going to make, you know, flat washers better than I did a year ago and better than I did three years ago, better than I did five years ago, because I'm going to do these very, very meticulous things today. Better than I did a year, three years, five years ago.
- [13:33]
A
One of the joys I've gotten to watch the 10 year arc of like one business to now. So it's just every time I hear it, I get giddy. Okay, what businesses will you buy and what businesses won't you buy? Because aerospace and defense is a broad category. And again, you just touched on it. When I've been to your factories, you're like, that's it, it's a washer. Like, and there's a different size washer right there. Yeah, it's not making Rolls Royce plane engines and all this crazy stuff. Like, what are you interested in? What's a yes for you and an immediate no for you?
- [14:09]
B
Sure. The immediate no for us is commoditization. Right. And it should be for anybody. Because if you're competing simply on the, you know, cost frontier, that's, that's a challenge. Right. If. Unless you're WALMART, you know, 70 years ago. Right. That was their strategy and that's great. What's a yes for me is when I can dimension intellectual property in a way that nobody else can. And that's not meant to be cryptic or secret. It's just not many people have experience that allows them to look at a process, a science, the combination of mechanical processes, material science, and say that what's being done is truly unique and what's being done is truly unique and gives that business a competitive edge, whether they own the market, whether they, you know, have a better mousetrap than, than some other competitor. And honestly, like, whether that, you know, inherently limits competition. So it really comes down to the unit economics of making a singular part and doing it incredibly well and being able to satisfy your customer in a way that nobody else can. And oh, by the way, we look for businesses that manufacture 10,000 different parts per year at a unit cost that's incredibly low. Whenever you have this layer cake of protections, you know, that really wraps itself around process, intellectual property, explicit intellectual property, daily discipline and unit economics. That's a really, really tough business to, to enter because the moat is so big.
- [15:58]
A
If I said, but it's just a washer, I'm just going to smash a piece of metal and then cut a little hole. And cut a little hole in the middle. How hard could it be? What would you say to that?
- [16:08]
B
Come try to make, you know, how
- [16:10]
A
hard is it to make a washer?
- [16:12]
B
I thought, I thought it was easy too, until I, until I started doing it.
- [16:15]
A
Like for the common man listening, give like a one minute Explanation of what they're not thinking about when you say I build washers for airplanes.
- [16:24]
B
Yeah, they're. First of all, they're not thinking about the setup cost. Okay. To manufacture a washer. Yeah, right. So how are you going to make that washer? Are you going to machine it out of, you know, bar? Are you going to press it out of some sort of, you know, stainless steel strip or inconel strip or titanium strip? Like, you know, those are all, you know, right there. I've given you, you know, six different, you know, decisions that you have to make before you've even, you know, thought about, you know, the dimension or shape or size or thickness of that washer. Well, you know, then are you going to, you know, have to have some sort of specialized tooling? The answer is typically yes. Well, that tooling is not exactly cheap. Well, if the customer expects that washer to cost, you know, $0.05, you may have a decision to make to, to invest $50,000 in tooling. Well, the purchase order that you may be going after may only be worth $5,000. So the return on that investment just for the tooling itself, you have to make a decision whether that's a business that you want to be in. You know, once you've made that decision, then you actually have to know what you're doing. Because, you know, pressing or machining or however you're manufacturing that washer is not really simple. Whenever you're talking about the dimensional accuracy that you have to have, you know, for aerospace products, you know, there are, you know, some dimensional secrets and, you know, problems that actually come up whenever you're, you know, hitting the metal. And I won't get too much into the material science, but you actually have to really know what you're doing. And that typically takes, you know, decades of learning. And that learning comes through trial and error and kind of investment and reinvestment. And so now I'm only talking about like just the base material. Then you have to end up coating that washer with some sort of embedded, you know, process that, you know, protects the washer. Because the washer may be going into a part of the airplane that needs to be lightning strike resistant or that part of the airplane is going to have that washer touching two dissimilar metals. Right. And you need to then understand material science so that you can coat that washer properly and then so on and so forth. And you have your quality inspection, you have your paperwork, and you have to do that for a unit cost of again, let's call it pennies. Yeah. Somebody has to, like, you know, really think long and hard about whether they want to be in that business. Maybe I'm just sick and twisted to be in that business.
- [18:59]
A
But was this always like, did you kind of pick up on this as time went by, or was this the initial thesis, like, I want you to kind of articulate more this layered cake. Did you always think about it as a layered cake or now 15 years later, you see it way deeper than you ever saw it before?
- [19:17]
B
Certainly I have more clarity today than I ever have. You know, 15 years ago I knew, I think there was a. There was a visceral knowledge that I had about the layer cake, the live of. Of protections, not just from a technical perspective, but also from a business model perspective. Right. If you do these 20 things from a business model perspective, and these 20 things are generally relevant and present from an industrial perspective or a technology perspective, you're going to, you know, have a good, good chance at success. Fifteen years ago, I wasn't able to articulate those. I think over time, seeing, Seeing patterns and being able to recognize those is a big, big part of the learning. Certainly I probably, you know, present to investors a lot better today than I did 15 years ago. Right. But the thesis was there, you know, so the, you know, 15 years ago, like, people ask me all the time, you know, how is Novaria different today than it was when you started the business? And I tell them it's not too different. Like, it's. It's really a manifestation of what I thought it would be. You know, did I think we were going to be in some different products? Perhaps maybe a little bit more, you know, fluid power versus mechanical hardware and material science, perhaps. But, you know, the base business model, I mean, it was it. I wanted to make sure that our business was a business model business, not a. I'm going to make this product business. Those are two very different things. I think a lot of people go into entrepreneurship or business thinking, I'm going to make the world's greatest gummy bear, and that's what I'm going to sell is gummy bears. Okay, well, you better have a really good tasting gummy bear as opposed to saying, I'm going to make consumer goods that, you know, probably feed people and, you know, again, keeping a little bit more of a broad category and then letting the products, you know, kind of be defined by, you know, business model attributes that will actually work for you. It's a completely different way of thinking.
- [21:42]
A
Okay, so. So at day one, the business model Say it again. What was the business model when you set out to start Navarria?
- [21:51]
B
High mix, low volume, low relevant cost. Products that typically go under the radar, or what I call esoteric products.
- [22:00]
A
And how many times have you been like pulled either by people or in or just. Because the more you success you get, people want you to do different things and they've got better ideas for you. But you really. And if people knew you personally, you have a wide range of interests. So to be so enamored by something that maybe you think's awesome, but to the world is like kind of this boring grind. Is it just been you with this unbelievable will to say no to everything? Do you just see it so clearly that it's so obvious you wouldn't go do that? Because I have to imagine over 15 years somebody's tried to pull you to doing commoditized things or more sexier parts of the plane.
- [22:39]
B
Those are called investment bankers. The people that try to get you to do that because their incentives aren't aligned with you doing boring things that are going to make you successful.
- [22:51]
A
Just great pitch decks.
- [22:53]
B
Yeah, it's like, hey, you should get into this. Why? And that's when you realize there are really good investment bankers out there that do understand what you're looking for and they have dimensioned your strategy a little bit better than others. And so I kid. I mean, I have a lot of good investment maker friends, but yeah, I'm also being honest too.
- [23:11]
A
Yeah.
- [23:13]
B
Yeah. So. So the discipline of saying no is, is very real. And the discipline of saying no actually gets, gets better and sharpened so that you're saying no faster today to deals than, than you were 15 years ago. And that was the, that's the other byproduct of scale is, you know, 15 years ago you had to, you know, think about other opportunities because you weren't getting to see necessarily every single opportunity there was because you weren't, you know, at this scale, you know, we're at a scale now where just about every single opportunity you would hope you get an opportunity to at least evaluate. Right. But you know, we, the fun part is occasionally you will see something that nobody else sees. Right. And I think that's a little bit of our secret sauce as well, is being able to identify a business that, you know, has been overlooked by dozens of potential acquirers. You know, in fact, I mean, our current partners, arcline, they, they've said it to me, you know, several times. They're, they're like, yeah, you've, you've acquired businesses that we wouldn't have necessarily normally acquired. Like, what did you see? And you tell them?
- [24:33]
A
And they're like, what did you tell them?
- [24:35]
B
You kind of, kind of what I told you. I mean, a lot more. I mean, I mean, they're, they're very good at underwriting and understanding our business, but they get, they get it very quickly and they've gotten it very quickly. And I think that's, you know, going to get us further faster. It's going to, you know, put gasoline, you know, on the fire. It's, it's a, it's a, it's a really good marriage when you have, you know, capital partners that are not just, you know, super intelligent, but, you know, have an alignment with you fundamentally around the strategic tenets of, of your strategy, where you're going. And again, to your point, this is what we're going to do and this is what we're not going to do. And so, you know, that's the way a marriage should be. You know, I don't care if it's a business marriage or personal. At the end of the day, you have to know what you're saying yes and no to very quickly.
- [25:28]
A
I think I could be wrong on this, but like 80 to 90% of the deals you've done have been direct. They have been proprietary.
- [25:36]
B
Yeah, that's right.
- [25:37]
A
Can you just speak to how you've kind of set that up? Is it just because you're in the right places at the right time? Is it being in the game long enough? Because every time I talk to you, you'll say something like, yeah, I've been talking to this owner for four or five years or seven years or eight years. But you always seem to have a dozen lines in the water. One's that means somebody's always biting. But if you've bought 27 companies, that means you've bought, I don't know, 22 or 24 of them direct. How have you just thought about deal flow and deal mechanics that way?
- [26:11]
B
Patience. Patience creates incredible outcomes. Like, the problem is most people don't, don't have it right? Like, I'm in a long cycle, long tenured business. And so I think about the world, you know, in decadal chunks, right? I think about life and decadal chunks, like making decisions today because, you know, 45, you know, this is where I want to be when I'm 55. These are the decisions that I know I need to make today in order to get there. So I don't have a problem building a relationship. That may unfold over 10 years because that's where we need to be. So I think that's number one. Number two is you have to have an incredible amount of credibility, right? And it really comes down to doing what you say you are going to do over and over and over again and, and not compromising on that. So your reputation really has to be a byproduct of years and years of doing what you say you're going to do, whether that's, you know, within the transaction or it's doing, you know, doing what you say you're going to do for a customer and having a reputation for doing that. And, you know, so I think, I think that's number two and I think number three, which goes into the credibility and trust equation is to be, you know, not just reliable, but credible. Right? And the credibility comes through having done really boring, mundane, unsexy work. Right. I spent the first 10 years of my career in jobs that most people listening to this podcast would, would never think of taking. Well, people ask me all the time, well, have. How do you know these things? Well, it's because I took jobs that, you know, you with a, you know, Ivy League education, like, never had to take, right? Like, it's almost, it's, it's almost a benefit to, to not come from privilege and to not come from education and people, people miss out on that. And I feel bad for people who get to a stage in their life where they haven't actually had to experience, you know, grit and, you know, the banality of work. You know, what is it like to sit in a cubicle and stare at a computer and do things that are absolutely boring? Because the degree you got was a journalism degree from tcu. You know, self deprecating there. I'm kidding. There's a lot of great journalists from TCU who have wonderful careers. But when you have, you know, a finance degree from, you know, Wharton and you graduated at the top of your class in, you know, the early 2000s, you probably went into investment banking or consulting. You didn't have to work in a factory and you didn't have to learn these very obscure details of how to do things on an industrial basis. And I've told that to people. They're like, how did you learn this? I'm like, well, I didn't go to the school that you went to. And that's.
- [29:34]
A
How can you explain maybe think of one thing you've done that when you're having that conversation with someone saying, I've done this, that you Just wouldn't never really want to do, but I did it. Give me an example of something that you did for long periods of time that gave you, looking back, the stripes to be able to do the things you're doing now.
- [29:53]
B
Yeah, this is dating me. But one of my first jobs was going through government solicitations or requests for, quote. And we would have a. There would be a stack of 8 and a half by 11 paper that got printed out every single morning in an automated fashion. So the government would send out, you know, hey, this is what we need. Thousands and thousands of parts. And I would go through every single piece of paper and make a determination whether or not that was something that I was going to be interested in bidding on or a piece of business that we potentially wanted and. Or goes into the other pile. The one thing that I remember it was a tactile experience was my, my fingers would start to bleed, you know, by like midday because of how much paper I was touching, right? And then once you have kind of this filtered stack, you'd have to go through it again. And by the end of the day you'd say, hey, these like 15 things are what I'm interested in doing. And when you're doing that, you're, you're visually looking at numbers and alphanumerical sequences. And again, to think about somebody doing this today is really unfathomable. But what you do when you're doing that over and over and over again is you're learning really like the code of a business that nobody else would know unless they spent time doing that. So that, that's, that's one thing I think, on the manufacturing side, like, you know, the first business I bought, you know, you know, I spent time on the weekends going and taking rubber plugs and putting them in the middle of, you know, cylindrical, you know, products, and then, you know, checking them for dimensional tolerance because that's what needed to be done that day because we needed to get product out of the shop. So, you know, you just literally sit there and, you know, do manual work like you see, you know, people doing in some sort of factory in China. And you, you understand real quick, you know, what it, what it means to have, you know, dimensional accuracy and, you know, deliver quality product because you've sat there and touched it and done something with it.
- [32:21]
A
Is the customer telling you, these are the dimensions, these are the coatings, this is exactly the spec I need? Or is the manufacturing, manufacturing telling the customer this is what you need? Based on updated data, it's both I
- [32:34]
B
mean, the customer will give you a specification, but, you know, how you do it is, is your recipe. A lot of times they'll be pretty explicit. A lot of times they won't be. You know, we do have a lot of products where it's our unique mechanical design. And so those are, those are proprietary to us. We also have chemical science or material science that is unique to us, meaning it's our proprietary formulation. So it's a, It's a combination. You know, the customers, you know, would like to standardize as much as they possibly can for. For good reason. But, you know, there are just so many unique attributes of, of. Of an airplane technically that, you know, kind of COVID both. Both ends of the spectrum.
- [33:21]
A
So just going back. So in doing those mundane things, was it like a light bulb moment that you're like, oh, shoot, this is the business model that I'm going to spend my life working on? Or like, what was the breaking point that you're like, I have to go do this?
- [33:36]
B
I think the breaking point was really, it wasn't necessarily around. Wasn't necessarily around. This is the business model, and this is what's going to work. The breaking point for me was realizing that large public corporations have inherent organ, at least they used to. This may not be the case as much anymore, but they had really stringent hierarchical structures. And I just was very impatient in my 20s, and I was like, hey, that's cool. If I'm on some sort of developmental path to be an executive at a Fortune 500 company, I just didn't want to wait until I was 55 to get the position that I really wanted. And so I began to think more deeply about ways to, you know, become an entrepreneur with. With what I knew. Right. I didn't set out to. That's the thing. People ask me all the time. They're like, oh, you know, you know, are you an aviation buff? Do you fly planes? That's absolutely. Absolutely not. No. That's crazy. And then they're like, well, how did you get into aerospace? And I'm like, I needed a job.
- [34:48]
A
Yeah.
- [34:48]
B
And then they're like, well, like, you know, they think there's some sort of elegance behind this. No, I was just very, very fortunate to need a job. And that job that I got was in an industry that had these. These wonderful dynamics. And I worked for a really good company that enabled me to learn. Like, this wasn't just, you know, I didn't sit in the. At the TCU library trying to figure out, you know, what to get into, you know, and so what you do is you learn something, and then you try to figure out how to springboard that into entrepreneurship. And a platform that we created.
- [35:25]
A
A platform that we created. Describe Navarria as it sits today. What is the platform look like?
- [35:31]
B
Yeah, so the business is broadly into kind of two categories. You know, engineered products. So think everything from very unique, fascinating technologies and fluid fittings and different latching and locking systems. And then, you know, we have different types of surface treatments and material science.
- [35:52]
A
Okay.
- [35:52]
B
So everything from, you know, proprietary sealants that, you know, go on the inside of engines to, you know, conformal coatings that coat circuit boards for ruggedized electronics, you know, to protect them at, you know, 35, 40,000ft and a whole slew of other things. So those are kind of broadly the two segment categories that we're in today. And that's not. That's not restrictive to our business because a lot of products, you know, fit under engineered products, and a lot of services and science, you know, fit in the other category. So I think, you know, we've really just begun to, like, see these categories emerge. Right. Over time. You know, people were always like, oh, you're making nuts and bolts and washers. I'm like, yeah, but it's this bigger category.
- [36:51]
A
Yeah.
- [36:52]
B
Right.
- [36:52]
A
And what's the actual structure of the business?
- [36:54]
B
The actual structure, in terms meaning Navaria,
- [36:57]
A
is like the corporate structure, and basically how you let your managers run your businesses individually. You're not just cramming everybody together.
- [37:05]
B
Yeah. So we. We deploy a very. It's a centralized controls, decentralized operations structure, and that works very, very well for us. So we have 24 different factories throughout North America, and each one of those factories does something very, very specific. They're what I call focused factories. Right. So how you make a nut is very different than how you make a bolt. How you make a washer is very different than how you make those things. How you make a locking system for a Navy nuclear submarine is completely different as well. So we keep these operations decentralized because that enables focus and accountability. Right. So we have general managers that oversee each one of these, you know, facilities, and their focus is to win the day every single day for those facilities. And they need to do so, you know, in the most efficient way that they can. And they're going to come up with better ways to win that day than I could ever do that running, you know, the corporate structure. The corporate structure. The purpose is to really centralize controls, you know, so how we do accounting is very common how, you know, what sort of IT and infrastructural systems we deploy is very common, you know, so on and so forth. But the day to day decision making, how that plant is running, how it is cutting jobs to the shop floor, prioritizing what it's doing, that is done, you know, locally and with a great deal of autonomy.
- [38:45]
A
So if I sold my business to you today, what would the first 90 days look like after we closed?
- [38:52]
B
First 90 days, what we like to tell people is that the people on the shop floor won't recognize any sort of change. But within the first 90 days, your accountant will absolutely know things have changed. Your controller, your bookkeeper. And so that's the big difference. And it's not meant to change for the sake of change. It's just, you just have to get all of your controlled systems, you know, in harmony and then, you know, keeping the workforce engaged over time. Yeah, sure, they're going to know that they have a parent company, but the purpose of the parent company is to just make their life better. Right. It's to provide them with the tools that they need and the resources and to celebrate their wins. Right. So if you own the business and you had a great culture of, you know, celebrating record months and quarters and, you know, having, you know, holiday parties, like those are, those are wonderful things that we're going to keep. But if you were like, you know, the miser that you are and you didn't do those things, perhaps we would introduce, you know, those things to, to improve. Yeah. Morale and a culture of engagement. Right. Like, you know, the key to our success or a huge key to our success is just having a very engaged workforce. And that's. And it's not rocket science. It's just daily management not only of your business, but of your people and making sure that you're deploying golden rule concepts all the way down the chain and you're doing so with no ego. That's the other thing too. I think culturally, in a decentralized business model, you really have to strip out ego. Right. Because there's no place for ego to exist.
- [40:47]
A
Yeah.
- [40:48]
B
I mean, if, you know, you're judged on the merits of what you do. And that was the other aha. Moment for me, working for a large corporation. And there's nothing wrong with large corporations. It's just I didn't like the idea that my career at that point in time was really dependent upon what one or two people thought about me.
- [41:13]
A
Yeah.
- [41:13]
B
Which was like my boss or. And I had great Bosses. But I just didn't like that. I was like, okay, so I'm gonna work really hard for 20 or 25
- [41:21]
A
years and hope they still like me.
- [41:24]
B
And hope, hope whoever still likes me. But I didn't. I didn't. I don't like politics. Would I be a good politician? Maybe. I think I make good decisions. But do I like it? Absolutely not. Yeah, there's a big difference. And so building your own business, you get to, you know, have that license to, you know, decide culturally, are we going to be a political organization or not? And the answer, answer for us is it's a hell no.
- [41:50]
A
All right, y' all have heard me talk about Better Pitch for years on the podcast. I'm super proud of their founder, Nico, who is a great friend of mine. He's one of the best young entrepreneurs I've come across. And in just two years, he's built an incredible company that is now rebranding as Collateral Partners. And honestly, it makes perfect sense. From single family investment decks to complete brand overhauls, ongoing partnership support, to market research, they deliver institutional grade work that actually moves capital. Think of them as the difference between looking like a startup and operating like an institution. They're really your entire institutional marketing department. The team you wish you had in house but can't justify hiring ex Goldman directors who understand your business, ex PE associates who craft your narrative, and world class designers who make it all look effortless. Go check out collateral.com and mention the Powers podcast and they'll give you a complimentary one pager. Enjoy the episode. Okay, you went from one business to now you own 27 businesses. You started with one family office that grew into two, sold to KKR, KKR to Arcline. A lot of times you kind of peter out at your ability to level up along the way. What's good at running one small company is not good at running a multi billion dollar company is not good at becoming a public company CEO. You seem to be able to keep leveling up to the challenge as time goes by. And I really want to talk about what the plan is with arcline here, but let's just start before we start that conversation off. When you think about leveling up, I'm trying to think of the easiest way to ask. It is just like how has your evolution of thought changed over time to where you just consistently keep matching the opportunity in front of you and not kind of flaming out?
- [43:48]
B
Yeah, it's. And we see that dynamic, by the way.
- [43:53]
A
Founders are not great CEOs, is what they say.
- [43:56]
B
Yeah, I think that's a hasty generalization, but for reason. Right. Because that pattern exists. Right. I will say that I started Novaria with the end in mind. I knew what I wanted to build was a large company that operates the way that we do today. So I wasn't a founder that was simply trying to, you know, get through the next day or, you know, have a singular liquidity event. I was a founder who deliberately knew that I had the ability to, or at least the capacity to think and take the steps towards building, you know, a really large, successful business. And I was deliberate in a continual, I mean, maniacally deliberate about protecting that arc to ensure that we are able to scale to the next level again and again and again. So, you know, when I think about where we are with Novaria today, I'm like, yeah, yeah, we're like in the maybe fourth inning, you know, like, maybe. I mean, you know, people are like, wow, this has just been amazing. You've, you know, you've built this great business. I'm like, yeah, but, you know, we can continue to go, yeah, like, this thing is, you know, we're just really kind of hitting our stride, right? And I think that's, that's, that's why the alignment with Arkline is, is great. Because they think the same way too. They're like, yeah, this is, you know, we're just getting started. And that's hard for, you know, people to, to, to wrap their head around. So, you know, when I started, the things that you have to do and the trade offs and the hard conversations just to get the inertia and the momentum behind your idea, that, that was the, that was so much harder than I ever thought it would be, you know, because in my mind, I'm like, it's so obvious. Yeah. Like, can you guys not see, like, what are you talking about here? Like, this is just the, the bowels of the aerospace ecosystem, which again, today I realized, like, okay, when you go pitch people for the first time, that's a very specific and unique business to be pitching them. But I was starting every single pitch with, this is where we're heading. And you're either a windshield person or you're a rear view mirror person. And I'm a windshield person. Right. But, you know, I use the rearview mirror, you know, just to, you know, to make sure that I'm winning every single day. But I'm, I'm looking out the windshield again. Decisions that I'm making today are, you know, really for the next, you know, five to 10 years the decisions that I was making 15 years ago, you know, are, what I'm doing today is a byproduct of the decisions that I made 10 or 15 years ago. And I knew then that there were, you know, let's call them one way door and two way door decisions. Right. You know, you've heard that as the company gets bigger, the more one way door decisions, you know, I have to make and I make those with, with, with arkline. Right. I make those with, you know, real thought and intent and a lot of intensity goes behind those, those, those decisions and you make very few of them. Most decisions it's like, okay, let's, you know, try this operationally and if it doesn't work out, okay, we can, we can change things. Right. But if you really make a mistake in the capital allocation portion of our business, you know, it can, it can, it can have, you know, real ramifications.
- [47:48]
A
Does anything come to mind of what's a one way decision you face at this scale with this partner at this point in time?
- [47:55]
B
Yeah, I mean, I think, I think any, you know, acquisition of significant size is, is, is, is very important and it's a typically one way decision. You can't just, you know, go to the supermarket and return it. Yeah, right. These are, these are organizations and you're going to live with, with decisions that you make. And I've, and I learned that and I'll give credit to my former partners. Right. Whether it's the, the family offices that backed me or KKR that was with me during the worst times of our entire industry and world. I was able to fail in nice, almost micro manners. I knew that if I was going to take a risk, let's let that risk not be at the expense of the totality of the business or let's let that risk be something that will say, hey, you know, that may have cost X, but the lesson was, was, you know, greatly beneficial because today there are decisions that, that I make because I made a bad decision 10 years ago. Right. And it's not necessarily bad decision. It was just a calculated risk that I took that, you know, didn't turn out the way that I wanted it to because I didn't understand something that was, you know, really embedded within, you know, within the essence of, of, of that business or the market dynamics. For example, I, I, I bought a business out of bankruptcy.
- [49:35]
A
I was going to ask you. So now just give the example.
- [49:37]
B
Yeah, so, so, so I bought a business out of bankruptcy, which you can do those kind of things whenever you're small and, you know, scrappy. And you have time, right? You have, you have time, right? And I was in, the business was in Long Island, New York, and the business was a fantastic. I mean, the products that manufactured were fantastic. The business had been around since 1850. I mean, it had started, it started manufacturing nails for buggy whips and over the arc of time, it had made hot section fasteners for aircraft engines. Very interesting.
- [50:10]
A
And you were like, that's my guy.
- [50:11]
B
It's like, yes, I need this. And of course, I was a lot younger and I was like, okay, yeah, you know, I'll make, you know, some lemonade out of these lemons. And again, that business wasn't a bad business. It just had a bad capital structure. And I was like, okay, if we, if we can fix these, you know, things, you know, it'll, it'll fix the business. Anyway, long story short, there were, you know, some product lines that I tried to add to it. And you know, it was just, the return on the energy was going to be very, very challenging. So ultimately what I was able to do was, you know, pivot. There was a metallurgical lab that the business had that I was able to sell to Boeing. It was worth a lot more to them than it was to me. And then I was able to take the manufacturing and move it out of Long Island. I mean, this factory, you know, this factory was next to a Lamborghini dealership. That's, that's how the value of the real estate had changed so fundamentally over, you know, a 40 or 50 year time period. And let's just be honest, you don't need to be manufacturing bolts next to a Lamborghini dealership in Long Island. And so, you know, now we continue to manufacture those products at, you know, at some of our other factories. So we redeployed and pivoted. But again, that was a very small, in the grand scheme of things, it was a very small deal. It was a very small opportunity, but it took an enormous amount of my time. And I think that's the learning that I would tell anybody to take from those things. It's like, hey, even some of your smaller one way decisions will end up taking an incredible amount of your bandwidth. And I think I actually have some gray hair as a result of that. But fortunately it wasn't, you know, a massive decision. And it turned out, it turned out great. I mean, again, we made lemonade, lemonade out of lemons. But those, those were some of the more stressful times, dealing with small decisions. That took a lot of the bandwidth.
- [52:11]
A
Okay. When you went from family office to KKR and now KKR to arcline, the question is this. And sometimes people sell their business and they're done or they know they're done. And so this takes those out. You know, I'm going forward like I'm still here on the other side of this thing, as engaged as ever, with a new set of incentives too. Now that you've been through multiple of them, what are you trying to figure out in this case about arcline during that dd? Like you're trying to get to know them, like they're trying to get to know you and what are they trying to figure out about you? So that when this deal closes and you're on the other side, it's kind of like an arranged marriage. It's like we have 90 days to date, get to know each other and then we are together.
- [53:00]
B
Yeah.
- [53:01]
A
Now that you've been through a few, if somebody asked you, like, what are things I should know or look for during those times? Maybe not to say if they're a good partner or a bad partner, but just to make it as successful as possible. The day it closes, what have you learned through multiple transitions where you know, you're the guy. The day this thing closes, maybe a little more money in your pocket, but nothing else besides a brand new partner. Like what kind of goes on during that period that you're thinking about.
- [53:29]
B
Yeah, you need to have real crisp conversations about what the strategy of the business is, you know, how you think about the world, how your capital partner thinks about the world. And look, there's no perfect science in that. I mean, you can build trust in a very short period of time. As long as you're having the right conversations and you're speaking the same language with arcline. They are incredible investors. They build institutional compounders. That's what I set out to, you know, really build and explain that real quick.
- [54:14]
A
What's an institutional compounder?
- [54:16]
B
So an institutional compounder is a business that services. There are several different, you know, categorical dimensions of it. But, but first is, you know, you, you are in an industry that is regulated and has high visibility to recurring revenue. Right. So very, very important. Right. If you're not in a regulated industry, lots of, you know, barriers, you know, fall. Right. But you know, aerospace, medical, industrial, automation, test and measurement, you know, those, those types of businesses have, have extreme barriers to entry and they generally have long cycles and long, you know, programs that have, you know, good recurring revenue. So that's kind of foundational. And then when you get down to it, the financial characteristics, meaning the business has to have margin profile that has a high degree of free cash flow conversion. So again, that's pretty technical. But what that essentially means is the margins have to be good and the capex relevant relative to free cash flow or the working capital dynamics of the business have to be, you know, in a certain box because what you ultimately want to create is a returns machine. And then you know, there's a, there's a couple of other features, but you know, a big feature of an industrial compound or institutional compounder is that there's an M and a story. Right. So what are you doing with the additional free cash flow that you're creating as a result of your improved operations and your commercial strategy? Those things that I said, that's what we do. Well, if you have all of these things and you're creating a bunch of cash and there's an M and a story, you can go redeploy that into better value opportunities that you're going to create value pretty immediately and you do it again and again. And so that's the compounding algorithm and I'm being overly simple there, but that's the model.
- [56:24]
A
Okay, so what is the plan with arkline?
- [56:29]
B
The plan is to continue to, Was
- [56:31]
A
that, was that, was that an easy discussion with them? Like, so what's the strategy? You're like the same one?
- [56:35]
B
Yeah, no, it was a, I mean, it was super simple discussion with them. I mean, number one, I've, I've, I've, I've known them as a firm for a very long time and, and I would encourage people to, to learn about what they're doing. They're, they're phenomenal investors and they've, they bought up. I mean, how do you know you have aligned interest with a capital partner? Well, if that capital partner has made decisions over of time that you would have made, that's probably a good litmus test. Like if you look at decisions that, you know, the capital partner has made over the last five years and you're like, yeah, I probably wouldn't have made like half of those. That's run the other way. Right. Like, but because it's not going to
- [57:17]
A
change with the economic change.
- [57:18]
B
Yeah, like, no, they are who they are. And so when, you know, operating in a very specific field, you know who the players are and you peer over the fence and you see what people are doing in adjacent product sets, adjacent sub markets and categories and you know, arcline was a very prominent name. And I really respected a lot of the decisions that they were making because I myself, like, saw myself making those same decisions as a gosh, that's a business that I would have loved to have bought, or if our strategy was a little bit different, that would have been a great business. And so when you have an aligned envy for what people are doing, that's probably a good partner. And maybe it's overly simple, but you asked the question and immediately jumps from, oh, Brian, what's your strategy? It's like they know what the strategy is.
- [58:20]
A
Yeah, that's why they're interested.
- [58:21]
B
That's why they're interested. The thing that was probably a little bit more interesting about our business is the depth of process IP and that layer cake that I mentioned earlier of how we think about what's an interesting business to Novaria, which again, falls in this esoteric parts bucket. I mean, it's not just. It's not that a washer is esoteric unto itself, but how you make it is absolutely that way.
- [58:53]
A
So do you now have just more capital to deploy? Are you going to go after maybe not different kinds of businesses, but within your two buckets, is there certain businesses now you can go after that you couldn't before? What would be a great outcome with arcline and how are you going to achieve it?
- [59:10]
B
Yeah, so, I mean, they recently took a business public called ARCs. You know, I think that's a great model, you know, for us to emulate. And again, a lot of these decisions are ultimately theirs and, you know, we'll have lots of conversations around them, but the plan is to continue to buy and build. We're looking at, you know, larger opportunities. Obviously, the, you know, with scale comes an obligation to, you know, Scale. Right. You know, to. It's the compounding problem. Right.
- [59:44]
A
The reward for good work is more good work.
- [59:46]
B
Yeah, it's more good work.
- [59:47]
A
For scale is more scale.
- [59:48]
B
Exactly. Like, congratulations on building a good business. Go do more of it and do it better and perform better than you ever have. The good thing is that we like that kind of a challenge. Our team loves to be challenged. Challenged in a way that's going to reward, you know, aligned incentives. Right. So so long as the power of aligned incentives is awful, you know, oftentimes, you know, greatly understated. I mean, it's amazing what you can accomplish if the incentives are aligned and if you don't care who gets the credit. Right. I mean, Navarri is, you know, a large business and people ask me all the time, like, what's you know, what are some of your objectives there? And I tell people, like, one of the objectives is to be the. Like, one of the biggest businesses that you've never heard of, because that means we're doing something right. Yeah, we like it that way. You know, I mean, yeah, I'm sitting here on a podcast, but, you know, you're my friend and just. Just don't tell anybody about this.
- [60:58]
A
Yeah, we won't tell anybody. If you're listening to this, don't tell anybody.
- [61:04]
B
But it's. It's not. It's not a secret. I mean, like. Like, again, Novarti has been around for a very long time, and people ask me all the time, do people try to steal your strategy or emulate what you're doing? I'm like, I'm a. Go ahead. Like, try, like, have fun. Good luck. I mean, good luck. It's very hard. People ask me, like, yeah, I was. I was actually asked this question, you know, as an entrepreneur, someone asked me, would you do this, you know, again? And without hesitation, I was like, absolutely not. No. Understanding and dimensioning the risks that I was stupid and naive enough to not think about. There's no way. Of course, the outcomes have been great, and I'm better for it than I ever deserve, and a lot of people's lives have been touched and fundamentally changed. You can't think about the outcome. Go back and think about the risks and what you had to do. There's no way I choose this.
- [62:01]
A
Was there a company from the beginning that was your North Star?
- [62:04]
B
Had there.
- [62:05]
A
Was there a few. Was there people that had done this that you're like, I want to be like that?
- [62:09]
B
Yeah. Yeah, I know. It's a. That's a great way. Yeah, I would. And I would encourage. Encourage anyone to, like, study these companies. Transdigm is.
- [62:17]
A
Is the one.
- [62:18]
B
Yeah, it's a. It's a phenomenal institutional compounder that, you know, is very well known. But I was. I was tracking Transdigm, really, since the early 2000s, and the founder and CEO there, Nick Halley, is, you know, has built, you know, just probably one of the most phenomenal businesses that you've ever. You've ever seen. And I was actually called by a recruiter when I was, you know, before I had started Novaria, and they were recruiting on behalf of a subsidiary of Transdigm, and they were asking if I knew anything about the company. And lo and behold, like, I told the recruiter everything that I knew, which took about 20 minutes. And the recruiter was like, hold on, you're, like, perfect for this company. I was like, no. I was like, I really, like, I'm gonna go start my own thing. And the recruiter's like, no, you need to come work for this company. I was like, no, I know what they do, and I really respect it. But I also think that there's room for a similar strategy, but not in necessarily their space.
- [63:27]
A
Right.
- [63:28]
B
And rather than try to completely copy a transdigm strategy, I just made a couple of pivots because, number one, TransDigm already existed. Right. Like. Like, why do I want to go be a copycat? Right? Like, that's just kind of lame, right? Yeah. Not only is it lame, but you're gonna, like, have to, like, compete with Trans Dime. Yeah. Somebody that's like, you know, it's like, so now, fast forward. There's actually been a lot of very successful people who have done that. But in my feeble mind, in my 20s, I was like, there's no way I can compete with that. So I'm just gonna have to come up with something that is a little bit of a different flavor. And that's what I did. But I told that recruiter back to that. I told that recruiter. They were like, so how much do you know about this? And I literally told the recruiter. I said, hey. I said, you know how, like, when you were a kid, you may have had, like, a poster of Michael Jordan, like, on your, you know, bedroom wall? I said, if I had a poster on my bedroom wall today, it wouldn't be Michael Jordan. It'd be Nick Halle. And that. I think he dropped the phone. I think he dropped the phone. But that was, like, my mindset at the time, because I was, you know, my hero was this dude in Cleveland that I had never met. Still, by the way, have never met Nick.
- [64:45]
A
If you're listening to this.
- [64:46]
B
Yeah. Yeah. But I was like, hey, like, this is. And that's. And that's when I knew, because I would. I would have these, like, obsessive conversations with people, and they would. They would literally look at me, and they'd be like, you're. You're talking about things in a way that nobody talks about. Like, you're. You're obsessed with these very specific things. You probably should do something about that, which is, you know, how I ended up talking to our first multifamily office that, you know, wrote the first equity check.
- [65:21]
A
Can you describe just the relationship? And you've had one with kkr. Now you had one, but now we're in the arcline era. What is your relationship with them? Like, do you talk to them daily, weekly, monthly? Like, what. What is it like to be the founder, CEO with this highly engaged, very successful private equity firm? Like, how do y' all work together at this level?
- [65:44]
B
Yeah, no, I mean, it's. It's a high degree of engagement. I mean, it's. Sure. I mean, there's. Not necessarily with me specifically daily conversations, but people on my team, you want to engage with them in. In a really deep way because you have a belief that you can learn a lot from them, and you have a belief that they can learn a lot from you.
- [66:09]
A
Yeah.
- [66:10]
B
So I think, you know, knowing that you have a partner that has a learning orientation and expects that you have a learning orientation creates for, you know, a really, you know, good environment. And their structure is super unique. They don't. They don't manage the firm like a typical private equity firm. They manage it a little bit more like a strategic firm in that they can completely deploy as many resources towards one opportunity, you know, that they have going on. So, you know, we have people from, you know, their firm working with folks in our business, you know, perhaps on a daily, weekly basis. It's not just a reporting cadence, right? It's, It's. It's. How do you. How do you make each other better? And they have specialists that can go into a factory and help you think about the cost accounting structure and the application of overhead and improve and just improve how you operate your business. And that's what you want. The last thing you want is a firm that comes in and, you know, you know, deploys, you know, a slew of very expensive outside consultants and experts and luminaries that really aren't adding a ton of value because they aren't getting down to the detail that they need to get into for your specific business. There's a tendency to categorize things a little bit too broadly, perhaps, on the industrial side. Right. How you run a factory that produces products for North American automotive manufacturers is completely different than how you run a factory that produces specific aircraft products.
- [68:13]
A
Why?
- [68:14]
B
The quality systems are completely different. The nature of the precision in the products is completely different. The quality. I mean, the quality systems and requirements are completely different. The volumes, econometrically, the volumes are completely different. Think about this like the largest program ever in the history of the world, right, is the A320. And from a production standpoint, 737, you know, was at one point in time. But let's. Let's use the 737. Right. At one point in time, where they're making, you know, Boeing is making 30 or 52 737s a month. 52. Right. That's a lot.
- [68:50]
A
600 a year.
- [68:51]
B
600 a year.
- [68:52]
A
24.
- [68:53]
B
How many Toyota Camrys roll off the line? Yeah, right. Like a hell of a lot more than 52. Yeah. And, oh, by the way, what's the bill of material of a Toyota Camry? I don't know. Maybe 30,000 parts, maybe.
- [69:08]
A
What's a 737?
- [69:10]
B
Millions. Yeah. It's like it's a flying city. Yeah. I mean, two completely different end products. And. And that's the thing. Like, people oversimplify, and they, like, you have to think about, like, what are you building? And I would encourage people like. Like want to get into any market, go see. Go see how the end product is manufactured and assembled, go see how a plane's made, go see how cars made, go see how a medical device is made. And you'll understand, like, what business you're in in a much better way if you're within that supply chain.
- [69:46]
A
One of my favorite trips was we were in Charleston. What was it? That. Was it the 737.
- [69:50]
B
It was 787.
- [69:51]
A
787. You got. You got us in, and we toured the factory of where the 787 is built. And like, I don't know any other way to say it than. It's like an act of God watching these things get put together at scale. And then I think the Boeing thing happened, like, two weeks later.
- [70:09]
B
The Boeing. The Boeing thing, meaning the grounding of the 737.
- [70:12]
A
The grounding of the 737 Max. And if you had never been to one, you would have read the headline. It would have just said, like, Boeing's like, some terrible company. Like, can you believe it?
- [70:25]
B
They took a lot of lumps for that.
- [70:27]
A
And. And. And then I'm sitting here going, no, no, no, you don't understand. This is like the greatest comp. Like, these things are active. God, go try and build a plane and come back to me in 500 years when you've been successful. It was like you said, it was millions and millions of pieces. I mean, it's unbelievable.
- [70:46]
B
Boeing's a fantastic company, and they're a great customer of ours, and I'm excited about where they're headed. I don't think enough is being written about that. A lot of great things are taking place at that business, culturally, in GE as well. I mean, the transformation that's taken place there. It's a little bit more public, but the deployment of a lean culture they have with their CEOs is phenomenal as well. So I'm excited about where our customer base is going, period. Dot. But to your point about just how difficult it is, I mean, China has been trying to make a single aisle aircraft for 15, 20 years. And that's China. They can throw any amount of resources they can at anything. And are they going to be successful eventually? Yeah, sure, maybe. But it's just, it's incredibly difficult. So if you think about, you know, what our customers do, it doesn't get enough in today's world of social media and short form media, it doesn't get enough positive press. And I think we'll see people flocking back to those businesses for careers and jobs and stability. The world needs more airplanes. Right. It just does.
- [72:17]
A
And maybe that's a good way to bring this awesome conversation home. So when we last talked was 22, and I think in 22 you were still. The aerospace industry was in the. Oh yeah, it was in a really bad spot. And you said this is a, it
- [72:35]
B
was in the toilet.
- [72:36]
A
This is a long cycle business. But I think the things, and I know this for a fact, when we would sit and talk in those years, you were also pretty confident the recovery is coming. It's just gonna take longer than all the businesses that we traditionally think about. So now we're in 2026 and it appears like things are just humming right now. If we sat again, let's see, it's been four years. If we sat here in 2030, like what is the world of aerospace and defense look like through your eyes? What's some things that I should know about as you think about the next four years?
- [73:13]
B
Yeah. In 2030, I still think we don't have enough airplanes. I still think there's a supply demand imbalance. And it's, it's not necessarily a bad thing. I think you should always, you know, have more demand than you have supply for these types of goods. The thing that I think about a lot is the pressure that the entire ecosystem feels. It's positive pressure. Right. These are, these are champagne problems. Right. But if you think about the pressure that the ecosystem is feeling today with space. Right. Space is SpaceX Blue Origin. You can rattle off all the VC names. Those are real programs. They actually buy real product. They buy a lot from us. And they're great, they're great. But that's a market that didn't exist 10 years ago. And the supply chain is having to adapt to, you know, greater demand coming from sources that really didn't exist, you know, 10 years ago. And so I think, you know, you know, these things, you know, take time to kind of iterate and move down the chain. But in 2030, we're going to continue to be talking about the need for the supply chain to ramp. We're going to be talking about the need for more innovative products. We're going to be talking about material science in a way that we've really never talked about it. Hopefully by 2030, we're going to be talking about a new aircraft design that, you know, both Boeing and Airbus, you know, maybe putting out there. If you think about, you know, the, the programs that are flying today, they've been around for 50 plus years. The good thing about aerospace is that change is very incremental and for good reason. Right. You know, you're carrying hundreds of, you know, passengers, some of which are, you know, people that we all love. Right. Like, you don't want to take a bunch of technical moonshots, you know, with regard to new program design. But four years seems perhaps like a long period of time. But in aerospace it's pretty short. But I think within that time period, there will be a lot more movement and dynamics around the supply demand equation.
- [75:37]
A
And when you say we need more planes, is it more passenger planes, more cargo planes, more private planes, or all the above?
- [75:43]
B
I think all of the above. I mean, you know, we're seeing, on the, on the private side, you know, there's, you know, to buy just even a used aircraft, it's very expensive. Can you get your hands on one? You know, people are choosing to fly private for different reasons. Obviously, like with oil, you know, being, you know, at $100 a barrel, like, you know, that may have some sort of limited shock on the system, but I think over time you're still, you're going to see as you know, greater amounts of wealth are created at the top. You're going to see, you know, demand for business jets, commercial transport, I think is by far and away the greatest need. If you look at the most popular routes in the world, like we, as we as people in the United States think about our world, we think about flying from DFW to LAX or LaGuardia to Miami, like those, those, those aren't even in, like.
- [76:44]
A
Wait, there's more than that.
- [76:45]
B
Yes, there's a lot. I mean, we're talking about flying from Jakarta to, you know, Rio de Janeiro, right? Those, those are the routes that, like, people People in the US just can't comprehend how, how popular those types of routes are and they're becoming. And when, when the world GDP throughout the world rises for every incremental dollar of gdp, a disproportionate amount of that dollar of GDP goes towards air travel. If you think about it, when people's lives get better is when your life gets better. When my life gets better, a bigger proportion of each dollar earned goes towards air travel. It's a wonderful, wonderful phenomena for our business. And I think that's why investors, from a macro perspective, you know, love, love the tailwinds that are in aerospace, no pun intended.
- [77:38]
A
So you think the people still want to go to Italy? They're not going to want to put on a headset and look at Italy in their augmented little world in their closet?
- [77:47]
B
Yeah, they're not going to look at it through meta goggles or anything like that? No. People want to retreat to being in person more than they ever have. I mean, I mean, yeah, sure, there's, there's virtual work, but you know, when, when people, you know, can deploy their own capital towards human experiences, it's going to be in person. And, and we've seen, we, we saw that, you know, snap back incredibly fast from, from the pandemic. You know, I think, you know, the, the airlines and consolidation, you know, is going to play a role in how this all shakes out. But, you know, at the end of the day, humans are going to exhibit human behavior, which is to explore and travel.
- [78:28]
A
You have consistently been early on themes within the industry. Is there something you're thinking about that most of the industry isn't? Maybe not by 2030, but like in 10 years. Do you have like a thought that's like, I think this will happen that not a lot of people are thinking about right now? Or is that something you keep to yourself?
- [78:46]
B
I don't know if it's going to happen, but I think there, there would be an interesting emergence of a, a third single aisle player outside of, outside of China. You know, whether that's going to be, you know, Embraer or something else. I mean, there was obviously a failed merger acquisition from, you know, between Boeing and Embraer that I think was very unfortunate for. Maybe it's fortunate or unfortunate, I don't know. But, but I think that's interesting. I think one thing I've learned is that you have to expect the unexpected. And black swans do happen. Right. I think, you know, the difference between, you know, how I think about black swans and, you know, the Other, the, the other person. I think, I think black swans can be both positive and negative.
- [79:33]
A
I was going to say, is that a good black swan or a bad black swan?
- [79:36]
B
If a third emerges, I mean, I, I don't, I don't know if it's neither, if it's, if it's either good or bad for, for us, I mean, we're part of the supply chain. So the theory would be that we would have an opportunity to service the customer. The bigger theme is that we want the totality of the industry to grow and we want our customers to be incredibly successful. Nobody does. Well, if Boeing or Airbus or Embraer, Cessna or Textron is suffering, like we want all of them to be, you know, in a, in a good place and I think they generally are, I think they're well run companies and you know, highly investable companies that have good strategies and good leadership in place and they're getting better. Yeah.
- [80:24]
A
SpaceX Blue Origin, like the flavor of the decade seems to be space right now. Like, is that market going to just continue to explode? Like, is that in its infancy? Is that a first inning market? Or how do you think about space?
- [80:41]
B
Yeah, I think, I think it's pretty early. I mean it, you know, whenever I started in this industry, you know, over 20 years ago, 25 years ago, I mean, we were talking about space. We were supporting NASA, right, and we were supporting the International Space Station. It was this kind of like little tiny, like submarket spaces. A very necessary place. Low Earth orbit is a very necessary place for us to develop new technologies for healthcare and other, you know, humanitarian, you know, real needs. So I don't, I don't see that going any, I mean, there's a difference in, you know, the need for missions. Right. Do we, do we need to go to Mars tomorrow? Probably not, but you know, there's, there's a real need for launch, there's a real need for, you know, space exploration and low Earth orbit deployments. So I don't think that's going anywhere anytime soon. I think that is a new frontier and we're in the early innings of it. Yeah.
- [81:51]
A
Okay, my friend. Well, we're going to come back in 2030, we're going to rehash this conversation and see where we see what we got. Right.
- [82:00]
B
Let's do it.
- [82:00]
A
I appreciate you joining me again.
- [82:01]
B
Thank you, Chris. Appreciate you.