Admiring the Problem

Laurence Haughton wrote a book in 2001 with a title built to stop a person walking through an airport bookstore. A publisher had rejected his outline and offered him one more meeting on one condition, that he come back with a title that would do exactly that. He came back with It's Not the Big That Eat the Small, It's the Fast That Eat the Slow, and the book has outlived a fair number of the companies inside it. I read it in the Navy at an age when I had no business to run and no way to test the idea. Twenty-odd years later I bumped into Haughton on Twitter, which is not how anyone expects to meet an author, and had him on the LeverUp® podcast in March 2025. We spent 45 minutes agreeing with each other, which makes for a pleasant episode and a poor test. The real test of an idea about speed is what it costs the people who ignore it, and by then I had watched that bill get paid more than once.

The argument

Haughton and his co-author Jason Jennings did not arrive at speed by way of a slogan. They pulled data on more than 220,000 companies, interviewed 14,000 CEOs and read something like 500,000 pages of research in fields that had nothing to do with business before they wrote a word. The finding that stuck with me is the one about stalls. Nearly every company stalls at some point, 95% by his count, and two thirds of the ones that stall never get back to growth. The statistic says less about strategy than about what a leadership team does in the months after the numbers turn, and most of what they do is second-guess, slow down and wait for more information.

He has a name for the mechanism. Captain Hindsight is the executive who reviews last quarter's decision with this quarter's information and finds it wanting. Every organization has one, and the effect on everyone below him is predictable. People stop deciding. They wait for a certainty that will not arrive, they ask for one more round of feedback, and they aim for a flawless first attempt because a rough one will be reviewed by the Captain. A company can be full of capable people and still move at the speed of its most hindsight-prone senior leader.

My own story on that episode came from a parts distributor I worked on years ago. The business had launched 3 new products in 5 years. Engineering was fine and so was the market. The blocker was emails that did not get answered, requests that could be handled next week, and a meeting 3 months later in which nothing got decided. Once the deciding was fixed, the same people with the same pipeline launched 80 products a year. Nobody got smarter. The clock started running. My operating team had a phrase for the state we found that company in, and I used it on air without thinking much about it. Admiring the problem.

Where the clock sits

What I did not say on air is where the lesson came from.

In 2014 I was a consultant at a paper products company with on-time delivery at 87%, the lowest anyone there could remember, and a site general manager asked me across a conference table how he was supposed to get improvement done with his day job. I told him improvement was his day job. He did not believe me, and it took most of a year and a before the plant moved to a point where I didn’t have to support the change. I had no authority in that building, and I told myself that was the reason it took so long. It was part of the reason. The rest was that nobody in the room owned the clock, so nobody in the room moved.

The rule I took out of that building is that the clock is a decision and somebody is always making it. At Swaney Group the somebody is us, and the mechanism is a daily one. Daily direction setting and a daily management system sit underneath everything we touch, from how we source to how we run diligence to how we close to how a VCP runs on day 91. A problem that is still a problem tomorrow gets asked about tomorrow, at the same board, by the same people, and nobody gets to admire it for a quarter. The cadence is simple, and its whole value is that it does not let a no age.

"The cadence is simple, and its whole value is that it does not let a no age."

Paul W. Swaney III

It shows up in the deals we do not do. Earlier this year we walked away from a business we liked because the founder's number was anchored to what a buyer would have paid in 2016, and the gap between his number and ours was obvious to both of us by the second meeting. We could have spent 3 months and a quality of earnings confirming what we already knew. We told him instead, with respect, and kept the relationship. A fast no is the kindest thing a buyer can offer an owner who is not ready, and it costs him nothing but a week of hope.

It shows up in the deals we chase. When one of our portfolio companies pointed at an adjacent market it could serve, the buy box widened that week. Advisors were staffed, a term and valuation range was approved, and the first conversations were happening before a funded sponsor would have finished the memo to its committee. All of it came down to someone with the authority to say yes on a Tuesday and the habit of doing so.

Swaney Group Capital proudly uses Attio as part of our tech stack

What fast looks like inside a hold

Put a number on it. A 5-year hold has 60 months in it. 6 months of decline is 10% of the hold spent going backwards, and the recovery has to be paid for out of the months that remain, at a cost of capital that was underwritten on the plan and not on the stall. Take a business at 4m USD EBITDA bought at 6x. If the slide takes 500k USD out of TTM EBITDA before anyone acts, and the multiple holds, that is 3m USD of value to earn back before the plan shows a single dollar of progress. The lender is watching the same number, and the lender's clock does not pause while the sponsor persuades.

Speed in a hold has little to do with frenzy. Haughton's fast companies were deliberate about a small number of things. They decided with a date attached. A no from an incumbent got a date on it too, the day by which the answer would be yes or the seat would be different, and that date was set in the first 90 days rather than discovered in month 7. They ran post-mortems to learn and never to assign blame, because a blame post-mortem is Captain Hindsight with a conference room. They hired for speed on purpose, drawing a profile of what their fast people had in common and screening for it, and Haughton's finding on that one surprised me. Fast people tend to score lower on conscientiousness. They are not perfectionists. The right move is to put the high-conscientiousness people in quality and control, where a flawless first attempt is the job, and keep them out of the approval loop on everything else. Asking a fast operator to get sign-off from a careful specialist is how a company acquires a stall without noticing.

A banker or an owner can run the same test on a buyer. Ask what happened in the first 90 days of the buyer's last hold, and how many days passed between the first no and the first change. The answer says more about the next 5 years than the deck does.

I run a sponsor with no fund and no committee, which means the speed of every decision is mine and so is the delay. That is the whole reason to do it this way. Haughton was right 25 years ago, and the parts distributor and the tissue plant were right in their own ways too. The fast eat the slow. The only question that matters after the wire clears is who owns the clock.

I am the founder of Swaney Group Capital, a fundless sponsor focused in the lower middle market. LeverUp® is published weekly. More if I have something else to say.