A Turnaround Story

Welcome to This Week’s Leyendecker View

If you’re not passionate about the field you’re engaged in, you won’t have the grit or perseverance to compete with those who are.
– Ken Griffin

FAVORITE READ OF THE WEEK

Why we choose to avoid obvious information
Because it’s hard to shake our biases.

Chatbots are a security disaster
From the smart folks at MIT.

THINKING OUT LOUD

A Turnaround Story
They’re never easy

At a young age in my executive search career, I was fortunate enough to have stumbled upon the then-nascent leveraged-buyout world. This was the late 1980s, before the term private equity had been coined. Back then, these deals were called leveraged buyouts because investors bought companies using a large amount of debt (leverage).

The basic private equity effort is focused on buying companies, improving their value and then selling them for a nice, or really nice, return on investment. The industry has several strategies including:

• Buying an owner-managed company from an owner who wants to retire
• Buying a division of a larger company that’s not core to that company’s strategy
• Buying numerous companies in one industry to create an industry roll-up
• Buying a company in financial distress that needs to be turned around

While most private equity investors look to acquire growing and profitable companies, a niche group of investors look for companies in financial distress.

Companies in financial distress generally get there by way of too much leverage, too much debt. Paying off that debt siphons off capital that could otherwise be used for growth investments. Too much debt and too little growth can then spiral into exponential debt, thanks to growing interest on the debt.

These companies are typically strangled by bureaucracy, which impedes productive decision-making and can lead to stagnation.

They may have too many divisions trying to do too many things, many of which are not part of the company’s core capabilities.

There may be too many “pet projects” scattered across divisions, fracturing a company’s focus and holding back its potential.

These companies are generally bloated and desperately in need of cutting people.

And their expenses are usually out of control.

Most of the time, the company’s leadership is inept, which is what got the company in trouble in the first place.

These companies may also be in an industry that’s in the midst of a dramatic, innovation-triggered change. The only way the company can survive is to adapt swiftly or get left behind.

Sound familiar?

The United States is a “company” in financial distress. We presently fit the bill of an ideal distressed investor target—desperately in need of a turnaround.

We are over leveraged. We have too much debt. We have a massive and very costly bureaucracy and a massive amount of unproductive activity.

For too long, burdensome regulations constricted organic, market-driven economic activity and growth. Entire categories of our “operating efforts,” like education and health care, have become enormously unproductive as a result.

Like a private sector company turnaround, we must cut costs. We must eliminate unproductive operations, pet projects and “departments.” We must reallocate capital to core assets and more productive activity. And we must find new sources of revenue.

When an investor buys a company in distress, they typically replace the CEO with someone who understands the challenges, is action-oriented and has a high sense of urgency. The new CEO usually also brings in a new leadership team with the experience to execute a successful turnaround.

The Trump administration is the turnaround team. They appear to be applying traditional turnaround strategies.

Team Trump, through DOGE and other cost-cutting policies and efforts, is focusing on eliminating operations and expenditures that do not play to our core capabilities, are wasteful and don’t have a clear economic benefit.

Also essential to a successful turnaround is focusing on core assets and capabilities.

One of the US’s most crucial core assets is consumption. The Trump administration is using tariffs to meaningfully grow revenue from this asset.

Another of our core assets are our natural resources. While there’s still room to “drill baby drill,” a renewed focus on leveraging our natural resources has brought down the price of transportation fuels. And there appears to be significant interest in expanding our domestic minerals production in copper, lithium and more.

Innovation is another of our core assets. Team Trump has appointed an AI and crypto czar to unleash these rapidly developing technologies to ensure we win the global race and reap the greatest economic benefits possible.

A new focus on nuclear energy technologies and less burdensome regulation has the potential to increase our electricity generation capacity at a reasonable cost that will also lower consumer costs.

Here’s the truth about a turnaround: It takes bold leaders willing to make uncomfortable and difficult decisions that impact the lives of real people. Jobs are inevitably eliminated in a turnaround, sometimes entire divisions are closed. But this is the only way to staunch the bleeding and give the company a real shot at surviving. A turnaround also positions the company to, once again, grow and share its new economic success to all employees and the economy writ large.

It is only natural that those employed in non-core or unproductive government operations are hollering about losing their jobs. But, in the private sector, this happens all the time. Companies would not survive and prosper if they did not know when and where to cut now and then.

There is always resistance to change. It’s only natural. But if we do not adapt with a sense of urgency, our challenges will only multiply. All turnarounds require smart, courageous leadership and a willingness to tolerate the inevitable chaos that is a byproduct of adapting in order to survive and, in time, once again thrive.

THE RANDOMS

As we well know, so much of the stuff we buy is cheaper because it’s made by cheaper labor overseas. And it’s often more cheaply made. Such that we eventually have to buy it again. Is this a type of inflation we’ve failed to consider? We may not see inflation in the price of one purchase, but if we have to buy the same lower-cost, lower-quality item five times versus one expensive but higher-quality version…isn’t that a kind of inflation?

Imagine if in the process of rebuilding US manufacturing, we made the commitment to make the most reliable products in the world.

Yesterday I saw an advertisement that claimed “Robots will do everything better.” Lovely future this company has in store for humans.

Why is it that the legacy media claims to know for certain that the Big Beautiful Bill will increase the deficit over the next ten years but does not seem to consider Team Trump is focused on growing GDP, which will increase tax receipts and reduce the deficit?

The Trump strategy of sending violent illegals to countries different from their origin kind of reminds me of how the country of Australia was created.

The measles graph. The autism graph. Correlation or causation?

How about this for a “socialist” policy: One’s income dictates the fine he or she pays for breaking the law. The more one makes, the bigger the fine. This way, the law-breaking rich feel the same sting as the law-breaking poor.

It’s always hard to read the tea leaves when you’re drinking kombucha.

ECONOMIC NEWS

Economy

Industrial production turns positive
Retail sales snap back
Inflation ticks up a bit
Economists don’t see US recession

Labor

Second-tier cities are best job markets
Teaching the “success sequence”
BLS job growth projections to 2033
Salary needed to be comfy in each state

The Lone Star

Texas could become shipbuilding hub
Dallas, the city that can’t stop growing
Big Taiwanese company may invest in Austin

BUSINESS

Finance

Is the PE machine broken?
Are 401Ks ready for alternative assets?
JPMorgan’s crypto roadblock
Investment banking is in the dumps
But trading is setting records

Tech

The autonomous farm is coming
Google is betting on fusion
Oracle gives US government a discount
Here comes “spray” caffeine

AI

What AI is doing to creative writing
OpenAI takes on Microsoft Office
AI is radically reshaping tech workforce
AI not as good as experienced software developers

Energy Transition

Ford promises affordable EVs
An unintended consequence of “clean” energy
The fusion race heats up
Tidal energy works

THE NATION

The Washing-Tone

Foreign aid and public broadcasting get cut
Congress passes crypto bill
Trump pushes for real sugar in Coke
There’s no Epstein conspiracy
SCOTUS gives Trump authority to shrink DOE
Trump seeks to cut back student lending
Treasury had a surprising surplus in June

Tariffs

Bahrain announces $17B investment in US
Nvidia gets China green light
Why tariffs aren’t creating inflation
US plays hard ball with the EU

Social Trends

Superman is driving dog adoption trend
Republicans really love the USA
The partying recession is here

GEOPOLITICS

Global

The world’s most livable cities
India on the road to record IPOs
Mexico steps closer to autocracy
Turkey is doing the same

Europe

Brussels plans big tax on companies
Jamie Dimon is not bullish on the EU
How Greece came back from the brink
Europe’s most innovative companies

Ukraine

EU breaks out toughest sanctions in years
Trump is ready to play offense on Russia
Ukraine takes out Russian spies
Modern warfare is all about drones
It’s Russia and North Korea vs. Ukraine

Middle East

Iran is rearming its militias
Things ain’t working in Syria
We have not destroyed Iran’s nuclear effort
Hamas doesn’t want Gazans to eat

China

Xi suggests caution on AI and EVs
China’s GDP grows 5.2%
Did women once rule China?
How China is flexing its Pacific power
Does China have an iPhone killer?

War Creep

Germany seeks more from arms-makers
France plans to increase defense budget
Is Xi planning a Putin move?
The EU to stockpile critical minerals

MAKING A BETTER YOU

Mind
Get more quiet time.

Sweden’s secret to well-being
How to become friends with anyone
Happiness is not a heavy lift

Body
Get more outside time.

A strong body needs strong feet
This is your body on sugar
The creative power of walking

FUN STUFF

Let your hair down, baby! Even if you’re all alone.

The Extraordinary

Check out this cool historical tech tree
The Alaskan wood frog, oh my!
Awe-inspiring landscape photos

Music That Found Us

Hermano’s Gutiérrez “Sonido Cósmico”
Tex Ritter’s “Jingle Jangle Jingle”
Carley Scott Collin’s “Cowboy Sh!t”
John Lee Hooker’s “I Hated the Day I Was Born”

Worth a Watch

We love Superman.
Big names in rural drama, Eddington.
Such Brave Girls is crazy fun.
Ron Howard’s Eden isn’t Eden.

It’s Vacation Time

Check out Mother Nature healing itself
Have you seen Stonehenge II in Texas?
Stunning beaches in the South of France

The Yum Yums

How to make a soufflé
Summer pie recipes
Peach crisp
Hot summer eats recipes

PARTING THOUGHTS

I always say they have big hearts and little brains. They do not understand how the real world works. Almost every single policy rolled out failed.
– JP Morgan CEO Jamie Dimon on Democrats

IN CASE YOU MISSED IT

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