Tag: Lockdowns

#29 Luke Johnson, entrepreneur, investor, philanthropist

Fund Shack
Fund Shack
#29 Luke Johnson, entrepreneur, investor, philanthropist
/

Subscribe on Apple Podcasts | Spotify 

In his 20s, Luke Johnson led the acquisition of Pizza Express and as chairman, helped it become the UK’s leading pizza brand. He has since established and helped develop household names, Strada, Giraffe, the Ivy, Zoggs and Integrated Dental Holdings, as part of his family office vehicle, Risk Capital Partners.

He is a successful newspaper columnist, author, former chairman of the Royal Society of Arts, and current Chairman of The Institute of Cancer Research.

In our exclusive podcast, Luke provides a critique of private equity, a critique of public markets, a critique of lockdowns and some of the most sensible advice we’ve heard yet about how businesses should be run in this brave new world.

Uncorrected transcript\some inaudible parts

Ross Butler:

You’re listening to a Fund Shack, private chat number 29. Welcome to Fund Shack. I’m Ross Butler, and today I’m here with Luke Johnson, a well known entrepreneur, businessman, philanthropist, and private investor, Luke. Welcome. And I have to say thanks so much for coming to meet us physically, because this is the first time we’ve been back in the studio 18 months and personally I think it makes a real difference. Nice to see. I was looking over your bio in preparation for this. And I had to say, and I don’t say this just a flatter you, but I was amazed at the breadth of your undertakings and your achievements. So you’ve got obviously a varied portfolio. And within that I recognized about three quarters of the businesses. Now you do consumers, so maybe that’s not so surprising, but that leap out of me, then you’ve been a successful newspaper columnist over years, if not decades. And I know that that’s not easy to sustain and you’ve been very active on the philanthropic side. You’ve publish books. This is quite a productive repertoire. Now you only get one life, so it obviously doesn’t seem strange to you, but why do you think it is that you’ve managed to be so productive across so many relatively varied domains?

Luke Johnson:

Well, I think I’ve always liked to be busy and I have a father who has had an extremely long career and although he stuck to the one career of being a writer, a journalist and a historian, he, he was incredibly productive and wrote many, many millions of words and published 40 books and so forth. So I think he gave me a good example to follow as a role model. And you know, to a degree, I think life is what you make of it. And if you have the energy, there are always opportunities. I think given that most of us perhaps we’ll live to, you know, be in our eighties. That means we might well have a 50 year working career. And it seems to me, therefore that we should all plan to have at least two different careers and possibly more I’ve always been interested in people who’ve done a variety of things rather than just one profession and stuck to that their whole working life and then retired. None of that interests me in the slightest.

Ross Butler:

It rather goes against the grain these days, cause everyone wants to specialize to such a great degree. And if you’re seen to be your specialist in more than one area you’re seen as an amateur in at least one of those,

Luke Johnson:

Well, there may be some truth in there. And I think I could be accused of being a [INAUDIBLE] at some things in life. And you know, I don’t deny that if you diversify, then you may have less depth and you know, there are advantages to focus and specialization, particularly in the modern complicated world. However, the point you made at the beginning is we only have one life. It’s important to keep interested and lively. I think for example, take philanthropy. I’ve served on the boards of a number of different charities and nonprofits over the last few decades. And one of the great advantages of that is I think it teaches you things and you meet people that if you are only doing business, you wouldn’t. So I would actually encourage all successful people in sectors like private equity or venture capital to seriously consider whatever age, but say in their forties, the idea of becoming a trustee of a school or hospital or some other nonprofit, because I think it broadens your horizons. And that should be partly what life’s about. I think there is a risk if you only do one thing, you get dull and you repeat yourself and the needs to be more to it than that. I think.

Ross Butler:

Yeah. investing itself is very nature. Kind of it’s, you’ve gotta have a broad outlook on life because you know, you’re looking at different sectors. You are not the specialist, you’re not the, in most cases, the executive, the doer, you’ve gotta stand above that. So that will kind of make that, that probably adds to your ability to be a successful investor.

Luke Johnson:

Maybe I think one of the challenges for private equity is that although they pretend to themselves, they aren’t the specialist in terms of how to run a business or a particular industry. I’ve sat on boards with private executives who are there telling the managers how to run the business and making decisions that I think should be delegated to the executives who are full-time in that business. And the arrogance sometimes are private equity executives in thinking they know best let’s them down. I think there are some areas where private very good, you know, buying and selling for example, raising finance, they’re pretty good at that. Some of them are pretty good at picking talent but above and beyond that, you know, knowing markets, knowing competitors, you know, understanding the intricacies of the technologies that they’re working with, really being able to spot the best executives at the operational level to work with. Mm not so sure

Ross Butler:

I’m sure you’re right. And I actually, I think I do agree with you, but to play devil’s advocate slightly, if it didn’t work, would they, would they do it? It’s certainly the trend is for greater activism and certainly the institutional investment community buys the idea of interventionists private equity firms. So presumably they look at the data and think, well, those that are a bit more muscular in their approach with executives do better. There must be some cause in effect,

Luke Johnson:

There probably is if they’re the right private equity firm and as you well know, you know, it depends which quartile of a PE house you are talking about. I think we’re all humans and I think private equity investors have as much ego as anyone. And, you know, according to Maslow’s hierarchy of human needs, once they’ve developed a certain quantity of wealth what’s next, and obviously what’s next is some degree of status. And that would mean them adding value and making a difference and being important in the ownership so that the value accretion is partly thanks to them. Now, I would normally accept that the financial engineering aspects of deals are probably down to the PE house. I have they bought it on a low, multiple, can they sell it on a high, multiple, have they added the right amount of lever to goose the returns?

Luke Johnson:

Have they made a clever bet in the first place? All those things of course are down to them, but, above and beyond that, you know, quite often I think, you know, it’s debatable whether they really make a difference. Now, I think there are some very good private equity investors. And I, I would say on average, you know, successful private equity investors are clever people. And, you know, obviously if they succeed and they, you know, get backing from limited partners and, and show good returns, then they can’t be that thick. However, it’s amazing what lever in a rising market can do.

Luke Johnson:

And, you know, generally speaking over the last two decades, certainly, you know, it’s been a pretty good game to play. I would say private equity in terms of accumulating returns for investors and indeed enriching private equity investors. I think, and I’m not talking about myself so much, cause I’m not really an institutional private equity investor or executive, but I think it’s as good a career as one could pursue, if, you know, you want to get rich in a pretty safe way because you are playing with other people’s money to a very large degree and you know, you can write very big checks. And so if you get your bets right, then you do extremely well. And to a large degree you know heads say wind tails, other people lose. So, you know, private equity as a career has proved a pretty good bet. And I suspect it will continue some time because you know, there are a lot of organizations raising big funds and there’s a lot of parcelling which to a degree, you know, is self-fulfilling

Ross Butler:

So, you’ve packaged yourself up to some degree as one of those people, because yes, you are not an institutional, but you’ve got risk capital partners. You could have just been Luke Johnson, the big wealthy investor, but for some reason you see it as useful to be seen as part of that community.

Luke Johnson:

Well, I think probably a lot of people prefer to deal with a brand, an organization rather than an individual. I think an individual is more egotistical inevitably. I think when we set up risk capital partners over 20 years ago the sort of private office was much less common, I guess, if one were doing it now, you know, that’s what I would do. Also. I have more money now than I had 20 years ago. In the meantime, we also did raise a fund with limited partners. And you know, it’s say for one, an investment is now spent and we’re returning funds and it will show a good return to our LPs. And I think it’s been a success, but I didn’t wanna do another one. The point about a fund of course, is it’s a very, very long term commitment.

Luke Johnson:

It’s really a 10 year commitment from all the partners. And indeed obviously the limited partners. So it’s a very unusual structure in terms of most jobs, if you like. And, and it, it really is a partnership arrangement rather than employment arrangement and all the longevity and loyalty required that, that displays. And indeed, I think if you look at the history of most PE houses that have fallen apart more often than not, I would say it’s cause the partners fell out, you know, and that may have been because they made some bad investments, but quite often it’s literally personality clashes leading to the, you know, founding partners of the organization, not getting on etc. And that’s what leads the LPs to then dessert them. But I’m not in denial about the fact it’s a lucrative and on some levels successful structuring of buying assets, because I think there will always be the advantage they have over say, public companies in private equity are virtually, always willing to buy and sell.

Luke Johnson:

Every asset is for sale. And they are always willing to buy a new asset. Public companies are slaves to the cycles of the stock market. And very often in my experience, public companies are forced to sell at the bottom and buy at the top. And it astounds me how often I come across situations where there’s a public company in a particular sector that will know that industry very well and have huge synergistic advantages of making a strategic acquisition, but for a variety of reasons, they’re too slow or it’s at the bottom of the market or whatever. They can’t make the acquisition private equity, which doesn’t know the industry as well. And doesn’t have any synergistic benefits makes the acquisition and then flips it to the industrial buyer a few years later at a huge profit. And, you know, you wonder why does the public market always end up paying more? And I guess it’s because private equity are ultimately really M [INAUDIBLE] specialists, all they do is buy and sell in a sense. And that’s what they focus on. They’re small and flexible and they have this great timing advantage, which really plays to their strength.

Ross Butler:

I agree with you. I think it’s it’s one of those things and there isn’t a problem with it. As long as the, those rewards are accessible to as many people as possible. One of the problems is that anyone can invest in the public markets, but it’s, it’s increasingly easy to invest in private equity vehicles, but it’s still pretty difficult for your average job.

Luke Johnson:

Yeah. And of course, as we know, private equity still only represents a tiny proportion of the overall savings and pensions money out there. And as a proportion of overall institutional individual portfolios, it is growing, but it’s still, I would imagine worldwide, you know, under 10% across most diversified forms of savings. And it, it is gonna grow structurally more allocation is gonna be devoted towards private investments once or another, be it VC or PE. That’s probably a good thing. I’m not surprised even though, you know, two and 20 relative to public market management fees is I, the level of attention required investing in private companies is a great deal, more intense. So, you know, I would argue it’s, it’s justified to an extent and the returns are there. And another area where I think private markets have an advantage is they are more willing to put higher levels of debt into investments. Generally, my experience public company fund managers, don’t generally like to invest in companies that have 3, 4, 5 turns of [INAUDIBLE], senior debt. Whereas many PE houses are perfectly comfortable with that. Indeed. They would consider that a standard lever of leverage for a normal buyout. So, you know, that financial engineering in rising markets and growing businesses, compounds returns. Yeah. And  it’s an another advantage that PE has over public markets. So

Ross Butler:

Just at this point, can we step back to some of our international listeners might be wondering where have you come from, if you are not a mainstream private equity guy, could you give us a quick potted history, maybe looking, starting with, well, wherever you like, but particularly like Peter express as a signature deal.

Luke Johnson:

Sure. Okay. So in my late twenties I, and a, a group of partners took control of a private business called pizza express. We merged it with a a group of franchise restaurants, pizza expresses, arguably the leading pizza chain in the UK. It’s been going since 1965. We took control of that in 62, 63. We took it public.

Ross Butler:

Wasn’t it ’82?

Luke Johnson:

No, ’92, ‘93.

Ross Butler:

Sorry. Okay. Sorry,

Luke Johnson:

Go. I’d only just graduated from university in ‘82.

Ross Butler:

You said ‘62, so yeah, you’re Right.

Luke Johnson:

Yeah. ’65. It was founded. ’92, ’93 we took control of it. We took it public, and it was very successful. And I was chairman of that during the nineties and, the chairs rose from 40p to eight pounds more. And, off the back of that, I then started doing more deals. It initially mainly public company deals. And then through the later nineties and into the two thousands, many more private companies, and, you know, over the decades, I’ve probably invested as principle in 50 or more businesses with a strong bias, as you said, towards consumer and in particular areas like, hospitality and leisure, mainly UK. And you know, at the smaller end, I, I would characterize the classic investment I do as development capital. That’s my preference.

Luke Johnson:

So frequently backing a founder not always taking a majority stake, quite often, a minority stake. Yes, we do buyouts, but quite often, not and pretty flexible in terms of the types of deals we do in the structures. And I think that’s because to a fair degree, most of the time we’ve been using our own money, my money. And so we can do bigger and smaller deals. We can do longer deals. And clearly we don’t have to do any deals at all. I think one of the reasons I chose not to raise a fund when our last one was exhausted was, as I say, it’s a 10 year commitment. I’m 60 next year. And I didn’t wanna be marching into my sixties with a sort of, you know, seven, eight year commitment still to go of making, you know, a minimum number of investments and a minimum amount of capital deployed every year.

Luke Johnson:

And it’s been very interesting to me over the last 18 month, with the pandemic, a lot of private equity houses, particularly in 2020 sat on their hands grave mistake. I think they should have been out there doing deals. And you know, a lot of them were underinvested. Anyhow, they had a great deal of dry powder. They’re now even more under invested and they under are under huge you to invest. And, you know, ultimately a P house that doesn’t get money to work is no good to anyone. Mm. So they will get their money to work. Unfortunately they may well end up paying too much. Now, usually private act is pretty good at avoiding those sort of cycles, as I said earlier, and, you know, they’re astute people, private act invest. So they’re very reluctant to overpay, but I sense that quite a lot of houses have got their back slightly up against the wall in terms of the pace of investing. And that’s not a comfortable place to be. And I’d much rather be in a situation where you take a year off. Things are too pricey. Conditions are too difficult. I won’t be investing this year. And then do twice your usual number of investments when times are good for investing.

Ross Butler:

Yeah. So you have that flexibility, which is an advantage. We come back to maybe the structural advantages, but you mentioned you were active in 2020. I mean, what’s your view of the market and opportunities out there?

Luke Johnson:

Well, I’m very much to niche investor. So, you know, I’m not putting a hundred million to work a go or 200 million, whatever it might be, you know, I’m investing five, 10, 15 million pounds in each bet. And I think in the end of the market that I tend to operate in, there are opportunities two or three of the deals I’ve done in the recent past have been distress. And there’s obviously some of that going on, particularly in some of the sectors I’m familiar with. And those are deals that the vast majority of private equity houses are not geared up to do. Don’t feel comfortable doing for all sorts of probably good reasons.

Ross Butler:

Um there’s not much experience of doing distress deals.

Luke Johnson:

No. I mean, there’re obviously a handful of specialists that only do them and some of them are very good and really I’m really impressed by the quality of some of those deal doers.

Luke Johnson:

But they tend to focus only on that. Again, they would tend to be doing slightly bigger deals than me. And some of the deals I’ve done over the recent past has been modest if any competition, which, you know, for most private equity players is very hard to achieve. You know, generally speaking, every single deal is got proper advisors and intermediaries and is well marketed. And you know, the, the assets touted widely around the market and there’s plenty of competition and you get a, not a perfect market, but a pretty good market price achieved for most assets of quality and, and size. Mm.

Ross Butler:

Would you say that so I’m just trying to get to grips with what the secret of your success is. Would obviously you can’t put on a, on a napkin, but I’m wondering if to what degree would you say you use your intuition when you are assessing whether something is a good opportunity versus bringing in the advisors and producing reports for, you know, like, so a typical investment executive would then have to go to an investment committee and it would be a group decision, but it would also be a real discipline in terms of dotting all the eyes and crossing the Ts and making sure that there is a really explainable, calculable case. You don’t have to do that. So you can rely more on your intuition, to what extent do you?

Luke Johnson:

Well, I think having the discipline and having group input is vital. And you know, there have been occasions in the past where I have not been as rigorous as I should have been, not within our fund, but with my own money. And sometimes it’s blown up in my face and I, you know, I’ve tended always to be at the sort of higher risk, higher reward end of investing. So, you know, I’m much less interested in steady investments that will, you know, gradually make me twice my money. I’d prefer to go for things that make me three or four times my money, but occasionally go wrong and you lose everything. And obviously that’s highly undesirable and never part of the plan, but it can happen in life. It, it normally it doesn’t actually happen with deals. I do because of leverage it’s because the business hasn’t worked.

Luke Johnson:

I do use intuition and inevitably we are, you know, social animals who you mentioned at the beginning of this meeting, how much better it was face to face than on zoom. I completely agree. That’s all about what you might call intuition and being a human being I think private equity investors who pretend to themselves that it’s all science and spreadsheets are under an illusion. Hmm. I suspect none of them do actually think that because otherwise they wouldn’t be successful. No, I think having checks and balances is essential and they come in all shapes and sizes, not just credit committee, but of course, lenders and others will have their own, you know, impositions, I think relying exclusively on, you know, the accountants and lawyers and other specialist advisors to tell you all about the business, rather than doing any of your own personal due diligence.

Luke Johnson:

And having at least some in-house capacity of taking a commercial view on a situation and the people running it and so forth is a mistake. And you know, I have to say having worked with some bigger PE houses, some of them are very good at all that both having in-house resource, but also getting incredible work from advisors. So I wouldn’t to cry any of that at all. I think it’s important not to bely obsessed about the reports. I think you have to look at the big picture. You, you almost certainly, at some point have to take a view. I think sometimes, you know, I’ve seen PE houses miss a deal because they let relatively small issues cloud the thing, and someone else is more willing to step back and say, you know what, nothing’s perfect, good enough. I like it, etc. And it’s the right price and so forth.

Ross Butler:

Um you mean, a bias towards optimism to some degree?

Luke Johnson:

I think anyone in capitalism does. Yes. You know, if you don’t believe in growth and you don’t believe in a positive future, and you don’t believe in the potential of the business, you are backing to deliver value, then you probably shouldn’t be taking money on it. So yes, and I think probably ultimately most PE houses have that frame of mind or the individuals working in them. And so they should and obviously, you know, as well as making a turn on the multiple and the magic of leverage, the other biggest element in any private equity successful investment is growth. That’s the thing that will ultimately deliver the really great return growth. And indeed, it’s also what the buyer at the other end looks for. You know, I have occasionally invested in businesses that have very little, if any growth and they’re quite hard to sell because, you know, people don’t want to really invest much in stagnant businesses. And why would they, you worry that if he’s not going forward, he’s probably going backwards.

Ross Butler:

Yeah. You alluded to the fact earlier that you invest in relatively small deals and so they can be the specific situations that you’re assessing, but particularly I’d say at the moment, is it not increasingly important to take a more of a macro view as well, given the interventionism, let’s say of the state in various sectors are you having to, are you trying to factor that in, when you look at new businesses in areas that could be locked down?

Luke Johnson:

Well, it’s a very serious point and pretty profound for anyone who’s involved in markets and free enterprise and so forth, you know, have the rules of the game change such that the government will force you to shut in a way that would never in modern history of happened before and, you know, destroy the value you are trying to create here. I’m sort of without being ostrich like about it, I’m of the view that these are things one cannot influence, and generally, therefore you can, you know, give yourself a hashtag stressing about them all night long. I think you have to try and focus on your own specifics of situations where you can make a difference both in your own life and your business. And I guess I’m taking a view generally that, you know, with regards to, for example, lockdowns, which have been impacted certain sectors, like travel very severely indeed, ultimately society can’t afford many of these more.

Luke Johnson:

They’re just too expensive, both economically, psychologically socially. And so you know, the harms, the undoubted damage of lockdowns are becoming ever more apparent as was obvious because they’re diverse and long term, whereas of course, daily hospitalizations of and deaths from COVID to, you know, on a daily basis. But you know, governments can’t keep printing money. I don’t think in the way they have done to pay the bills. And you know, some of the bills for both businesses and governments are starting to fool you we’ve got threats like inflation. So and so on. So big picture means I don’t think, you know, countries like the UK and many others can really afford to do many long lockdowns let alone the fact that I think proof will recently show they don’t make much difference. So they really aren’t worth it, both health wise and wellbeing as well as economically.

Luke Johnson:

And therefore I think, you know, it’s probably a pretty good time to take a view and say obviously to a large degree, thanks to vaccines, but also the, the terrible costs of the interventions are such that they cannot be repeated again and again. And so as people keep saying, we have to live with the endemic disease and get on with work and, you know, start earning some money to pay the bills, which means decent businesses that might be shut down. If there were another lockdown are probably a reasonable bet, but there’s gotta be a discount somewhere in there. And, you know, clearly if once constructing portfolio, you don’t want to bet exclusively on businesses that are vulnerable to being shut down. And I know one or two PE houses where, you know, big chunks of their portfolio have been closed for much the last 18 months. I’m very lucky and is absolutely luck that I’d sold a whole raft of businesses over the previous couple of years, which would’ve been smashed to pieces by lockdowns. And thank God I did, because it meant that although I did have certainly a couple of businesses that are, you know, in sort of recovery mode, we say having been severely battered if I’d had a half a dozen of them, it would’ve been significantly worse.

Ross Butler:

Yeah. I think you’ve gotta be right to just focus on what you can influence. And yeah, I do find it surprising that there’s so little commentary on the potential fallouts, like economists used to issue, press releases. If we had a public holiday telling us how much it costs the British economy, and yet we’ve been impartial lockdown for two years and well, they don’t issue, press releases about it generally. It’s like, it’ll be all right. We’ll just go along as, as if nothing ever happened. So I think, I think you’re right. You have to just focus on what you can, what you can influence, but there probably will be a reckoning.

Luke Johnson:

Well, I think there needs to be reckoning because I think overall it can be argued that, you know, in certain ways society slightly lost its marbles over the last 18 months. I think the toll across many aspects of communities in terms of, for example, children and education, young people, generally, the damage to them the irrationality and lack of evidence base for some of the interventions and so forth and so on. You know, we don’t want to get distracted into that black hole. I is such that you know, in hindsight, in the years to come, I do think we will realize that grave mistakes have been made and I’m not talking about, you know, locking down two weeks too late. I’m talking about the very essence of universal lockdowns and the harms of, you know, unemployment and you know, the, the divisions it creates in society between those who have to still go out to work.

Luke Johnson:

And those who think that everything now is working from home for forever speaking personally, one of the toughest aspects has been, people thinking in a rational way when they’re all isolated. Yes. And I think for myself, and I believe for many others that actually you get things more right if you are debating it with others in person. Mm. And I think the idea that we’re all thinking rationally because we’re on zoom calls is diluted. I think there are very profound differences. I know for myself, I’ve had hundreds of zoom board meetings and such like, and I can tell you now they are very, very dysfunction compared to a proper board meeting with people in the room. Definitely no question of it. And for example, if you’ve got a large board and most large organizations and institutions have large boards, there is a massive predisposition towards people, not dissenting of any kind, when there’s a certain number, people on a zoom call, they are much more likely to stick their hand up or nod to the chair or do whatever it is to say, yes.

Luke Johnson:

I just wanted to bring up this one point. Can I just question this it’s extraordinary, how often a non-executive argument will do that and then two or three others will say yes, yes. I was wondering about that does not happen on zoom calls. Yeah. And you look at our leadership and the key advisor groups, for example, you know, in public health and others that have been making these draconian and extraordinary decisions all on zoom, not good debate, not good vigorous discussion of what are the, you know cost benefits of this. Have we thought of the whole picture here? Mm. And I think that’s been going on a great deal. And I think because we’re all snug at home, particularly those better off powerful people who run society in industries like private equity. The fact that, for example, you said at the beginning of this meeting, this is the first time I’ve had one of these interviews for 18 months. I can’t tell you how many conversations I’ve had like that, because I’ve been in my office and meeting people if I possibly can since May last year. Right. But every banker, every accountant, virtually every institutional person I know of fund manager, PE executive has been at home the whole time. And I don’t think that’s conducive to critical thinking. And

Ross Butler:

It’s so easy to say, well, what’s more efficient, you know, everything

Luke Johnson:

It’s convenience. Yeah. Convenience. Yes. You’re right. Efficiency is the wrong word because efficiency suggests getting it right. It’s convenient. It’s a bit like getting home delivered food. It’s very convenient, but mostly eats. I’d rather eat in a restaurant or have proper cooked food at home after you’ve done some shopping, then a crappy meal that is probably more expensive home delivered.

Ross Butler:

And yet it’s harder to articulate the benefits cause they’re slightly intangible and they they’re harder to, to put hard quantification on. And you also kind of alluded to the, everyone talks about quality these days, but there is a real inequality element to this whereby white collar workers like you and I could choose just never leave our homes again.

Luke Johnson:

Ft and economist readers love it all. Yeah. Because they run the world and they’re very comfy. They’ve got gardens. Someone collects the rubbish. Someone delivers their food. They, you know, get stuff on Amazon. They might see more of their family. What’s not alike and they’re safe. Meantime every year, every day in Britain, 10 million people are having to go out to work, to keep the broadband going and to deliver the groceries and so forth. And that is a more pronounced inequality on many levels than I think ever in our lifetimes. And you know, there are so many serious issues arise from this such a for example, has furlough undermined a chunk of the portions of the nation’s work ethic, you know, and it’s peak 9 million people being paid to stay at home. Why wouldn’t they want that to continue? Is the real reason people are willing to accept low quality output from working from home because it’s saving the money on commuting. I think that’s a big factor as to why lockdowns have had such enormous support seemingly. It’s not the science it’s because people are saving money on their fairs.

Ross Butler:

What’s your policy preference with regards to the companies that you own?

Luke Johnson:

Well, I want them in the office now it’s obviously up individual bosses. I would say, you know, if they think they can run things efficiently and you know, it makes more sense for their particular shape of their workforce to do it at least partly from home a hybrid model, flexible. I get it. And I think workforces these days will increasingly demand that and companies that insist everyone is in the office every day may struggle to recruit or retain people.

Ross Butler:

Although young people might find it more attractive.

Luke Johnson:

Of course. And I know I do. And I think there are, it depends on the big and the industry and the people in the work. UI guess people in my generation are much more likely to say, we’ve all gotta be in the room. Those who are, you know, much more used to the flexibility, should we say video conferencing might argue, no, let’s stick to what we’re doing now. And of course there are lots of things that can be done perfectly competently online rather than in person, but when it comes to anything critical, a key pitch or, a key sale or, interviewing someone to hire them or whatever it might be that really matters, then I see there is no substitute for doing it in the room. And, h passionately believe that. And I think actually it has been a competitive advantage, I believe over the last year in doing stuff that I am in the room when people are willing to be. And, h think it’s helped clench deals and given me an insight that people who are relying exclusively on zoom, you know, I’ve missed.

Ross Butler:

So the Woody Allen quote, which I’m gonna get wrong, but two thirds of success is showing up

Luke Johnson:

90%.

Ross Butler:

We’ll go with that. Leave us with something optimistic, positive. Can you tell us about deal you’ve got in your portfolio, you like the look of, or something about the world that you are optimistic about?

Luke Johnson:

Well to use that bogus venture capital phrase pivot, I have slightly towards areas that are more digital inevitably because historically, you know, I’ve invested heavily in areas like retail and hospitality, which means, you know, shops and restaurants and cafes in pubs and hotels. And of course, all of those, you know, have struggled over the last 80 months and face challenges going forward. So I would still invest in all of those sectors, but I’ve also made an e-commerce investment last year into a gardening products business it’s called Primrose. And that has an October year end, but we think it’s gonna deliver for this year’s results because it’s had the principal season now and we’re happy with that purchase. We bought it almost a year ago now. And I think it’s a good sector. And I think eCommerce in that space is growing gardening itself has boomed during lockdowns. And I think some of that will stick. And we are looking at further eCommerce investment because obviously it’s gonna take an increasing part of the market in terms of people’s overall retail spend. So

Ross Butler:

What’s primroses model. Do, do you have to go onto their website to buy their stuff or do they start.

Luke Johnson:

Yeah. I mean, you know, they have an app and so forth too, but mostly people are on the website and, you know, it’s, it’s exclusively, it’s not an omnichannel, so it doesn’t have any retail outlets at all. It only it’s, you know, only digital, and it’s quite long established business. And, it’s quite a fragmented sector. Actually. There are quite a number of digital players in, the overall gardening space. You know, it’s a sector that we stumbled across, but we like, and, I think there’s more to go for. So, yeah, I would say that was, a deal that we’re excited about and we think has, has lots of potential. And, and so inevitably, you know, if you look at e-commerce generally, you know, you are up against Amazon, but there are some sectors that they are perhaps less focused on. And I think gardening, you know, has some logistical challenges, gardening, for example, that Amazon seem less interested in. Right. And they’re such dominant player, ideally, you know, you don’t wanna be directly competing with them. Mm. We do work them actually as most people do in e-commerce, but, ideally you get people on your own website. Yes. And so yeah, that’s one business we’ve bought recently that, we think is interesting.

Ross Butler:

Great Luke. Well, it’s been great catching up with you in person. Thanks very much for sparing your time.

Luke Johnson:

Thank you.

Ross Butler:

You’ve been listening to the fund shack podcast, make sure you subscribe and visit our website@fundshack.com for many more video interviews. It’s the private capital channel for alternative investment professionals. Thanks for listening.