Tiny Office Hours: Annual General Meeting – June 15, 2023

Podcast: Tiny Office Hours
Host: Tiny, Chris Sparling, Andrew Wilkinson
Date: July 5, 2023
Episode: Tiny Annual General Meeting

Episode Overview

This special episode features a live “Ask Me Anything” (AMA) session for Tiny’s shareholders and community members—a nod to Berkshire Hathaway’s annual meeting, but with a cozier, more irreverent twist ("Coachella for capitalists"). Co-CEOs Andrew Wilkinson and Chris Sparling field uncensored questions covering strategy, capital allocation, acquisitions, company culture, and reflections on going public. The mood is candid, often humorous, and deeply pragmatic, embodying Tiny's ethos of humility, discipline, and long-term focus.

Key Discussion Points and Insights

1. Origins and Spirit of Tiny

• Name and Mindset:
  Andrew shares that "Tiny" was chosen to avoid the intimidating or “pirate-sounding” names of other investment firms (e.g., Blackrock, Grey Wolf). The intention was friendliness and self-deprecation.
  [10:53] “We thought Tiny was kind of humble. And at the time, we were tiny, frankly. So, yeah, it was just kind of self-deprecating.” – Andrew
• Unexpected Scale:
  They never aimed to build a public company; growth was incremental, driven by pragmatism rather than grand vision.
  [11:34] "We just kept staring at our feet and walking forward. Then we looked up and we'd climbed a mountain." – Andrew

2. Investing and Acquisition Philosophy

• Pragmatic Discipline:
  Tiny prioritizes buying durable, high-margined businesses at reasonable prices, with a keen focus on payback periods (ideally recouping investment within five years).
  [04:18] “We really try and stay disciplined, buy businesses for reasonable prices. When we're playing in a world where things can be disrupted by AI, we just have to be that much more careful.” – Andrew
• Evaluating Moats and Durability:
  The level of risk from disruption determines what they’ll pay (“right price for everything”).
  [16:38] “The more vulnerable the business is, the cheaper we want to pay for it. There's a right price for everything.” – Andrew
• Founder Due Diligence:
  People matter as much as business metrics—bad people mean bad deals.
  [13:52] "We've worked with bad people before. Life’s just too short." – Andrew

3. AI & Innovation

• Measured Optimism, Eyes Wide Open:
  AI’s risks and opportunities are recognized, but Tiny hedges through conservative capital structures and diversification.
  [02:45] "We have to be very, very disciplined and cautious in how we play in the technology world." – Andrew
• Innovation Process:
  Innovation typically emerges from small, autonomous teams, not top-down mandate.
  [41:05] “Often you get into the innovator's dilemma. Generally, our approach has been to take two or three people, throw together a little team, spin up a new business to try and do that.” – Andrew

4. Fund Structure and Capital Allocation

• Private Fund History and Plans:
  Tiny’s first fund was launched during Covid in anticipation of distressed opportunities but, ironically, tech valuations soared. It's close to being fully deployed, mostly into dividend-paying businesses.
  [04:18] “We have an all-star cast of incredible investors. Then we sat on our hands for a year—there was nothing to do.” – Andrew
• Capital Allocation North Star:
  The singular focus is growing earnings per share (EPS).
  [85:26] “Ultimately we want to grow earnings per share. That’s it.” – Andrew
• Debt & Safety:
  Leverage is used cautiously, with interest rate hedging and ringfenced liabilities.
  [64:04] "Debt is like a knife on the steering wheel. You have to be a good driver." – Andrew (echoing Charlie Munger)

5. Valuation, Margins & Public Markets

• Margins and Free Cash Flow:
  As a collection of digital businesses with low capex, the bottom line largely translates to free cash flow.
  [13:02] “It’s a pretty good proxy for free cash flow.” – David
• Going Public ("Why, and Why Now?")
  Access to capital, better debt terms, and the freedom to act as capital allocators made going public attractive.
  [49:11] “If you’re a true capital allocator, being public is the optimal thing.” – Andrew
• Valuation Multiples:
  Although they love 5–6x buys, they've paid higher multiples for exceptional businesses where the payback remains attractive due to growth opportunities.
  [62:13] "I want to pay ourselves back in cash in five years. That can mean paying 10x if we're confident in growth." – Andrew

6. Acquisition Playbook: Dribbble & Aeropress Case Studies

• Dribbble (Online Design Community):
  Bought it as users/insiders who understood its irreplaceable appeal and network effect; saw value in adding an ad sales function.
  [08:15] "Dribbble was an exceptional, unique business with an incredible network effect... we could de-risk by adding an ad sales team." – Andrew
• Aeropress (Consumer Product):
  Acquired due to cultlike following and product quality; leveraged retail and e-commerce expertise, with deep respect for the existing CEO’s vision.
  [25:06] "We hired an incredible CEO, Gerard Meyer. When we meet somebody, we are looking for alignment and alignment of vision.” – Andrew

7. Partnerships, Co-CEO Model, and Culture

• Robust Partnership:
  Andrew and Chris describe their relationship much like a marriage, underpinned by shared hardship, open conflict resolution, and mutual growth.
  [28:37] "Adversity builds memories... And any time we're kind of bickering, we have that hardship to fall back onto." – Chris
  [30:51] “There’s a great book called Making Marriage Work by John Gottman…we use that fight resolution framework.” – Andrew
• Remote, Decentralized Culture:
  Tiny was remote long before it was cool, shunning office culture for autonomy and “treating people well, paying them fairly, and giving them interesting work.”
  [54:50] “We’ve always been a remote company… most of the business is actually run via iMessage and email and asynchronous communication.” – Andrew
• Retaining and Attracting Talent:
  Look for smart, low-drama communicators who can grow into the next level; treat people with respect and ensure flexibility.
  [51:40] “People who are switched on, they're reading, they're good communicators, low drama.” – Andrew

8. Incentives and Alignment

• Complex Yet Crucial:
  Incentive structures are constantly iterated upon, with everything from equity grants and bonuses to requiring executives to buy stock. Simplicity and direct alignment are paramount.
  [44:01] “Incentives can be very hard because you can easily outsmart yourself. The simpler we make it, the better.” – Chris
• Long-term Shareholder Alignment:
  Ownership and “skin in the game” are core—Andrew and Chris control 81% of the vote and have most of their net worth in Tiny shares.
  [72:35] “The best defense is it’s my money too. And I have just as much to lose.” – Andrew

9. Selection, Sectors, and Circle of Competence

• What NOT to Buy:
  Avoids “sexy” sectors drawing too much competition, and any business with big commodity (transfer pricing) risk. Loves “riches in niches.”
  [38:56] “Fish where the fish are. We think boring is beautiful.” – Andrew
• Circle of Competence:
  Invests only where models are simple enough to explain to their parents; gradually expands the circle by learning and testing, not via aggressive leaps.
  [81:37] “Could I explain this business in one or two sentences to my parents? If yes, then that's something I probably want to invest in.” – Andrew

Memorable Quotes & Moments

• On Durable Business Models:
  [16:38] "We’d much rather buy a cruise ship that’s sailing to Hawaii all day, every day. I want to be buying cruise ships, boarding them, enjoying the sun deck." – Andrew
• On Diversity of Incentives:
  [42:33] “We've tried stock options, equity grants, profit share, bonuses… They all have their pitfalls... But at the end, if somebody is delivering and it's within their control, incentivize them on that thing.” – Andrew
• On Hiring/Firing:
  [70:01] “If you think about firing someone, you probably should. You never think, should I fire this person, about superstars.” – Andrew
• On Competing Buyers:
  [74:04] “Most people are trying to get rich in the short term, not in the long term. This strategy is much more of a long-term approach.” – Andrew
• On Market Cycles:
  [47:26] "We're kind of barbell. Both paranoid and terrified and licking our lips and excited to go shoot some elephants." – Andrew
• On Deal Flow:
  [65:47] “Almost all of it is inbound. We have this incredible deal flow; we’re not having to employ a 25-person team of analysts to reach out.” – Andrew

Notable Timestamps & Segments

• [02:26] – Macro on AI & Risk Philosophy
• [04:18] – Private Fund Context
• [05:31] – Buyer Due Diligence on Dribbble Acquisition
• [10:35] – Concrete Advice on Doing Your First Deal
• [12:41] – Margin Profile, Free Cash Flow, & Public Company Mentality
• [13:52] – Founder Due Diligence and 'Only Good People' Rule
• [15:26] – Annual Meeting Format, 'Coachella for Capitalists'
• [16:38] – ‘There’s a Right Price for Everything’ Analogy
• [24:12] – 'Paranoid Survive' Risk Management
• [25:06] – Aeropress Case Study
• [28:37] – The Importance and Nature of the Co-founder Relationship
• [41:05] – Innovation via Small, Focused Teams
• [44:01] – Incentive Complexity
• [54:50] – Remote Work Culture
• [62:13] – Valuation, Arbitrage, and Replicating Berkshire
• [70:01] – Firing Fast Philosophy
• [81:37] – Circle of Competence
• [85:26] – Performance Metric: Earnings Per Share
• [97:50] – Where Their Curiosity Is Aimed Now (AI, Insurance, Float)

Closing Thoughts

The episode is a master class in candid, operationally-driven investing and leadership. Andrew and Chris’s humility, skepticism of sexy fads, and bias for action (“napkin math,” “heads you win, tails you don’t lose much”) set Tiny apart. Their answers reflect not only best practices from business legends but also a culture of learning, patience, and authenticity that resonates strongly with their long-term partners and investors.

End of Summary.

If you're considering building, investing in, or scaling companies, don’t miss this for the pragmatic wisdom, concrete frameworks, and rare founder transparency.