Culture before numbers Something happened yesterday that reminded me that some of the most valuable investment research doesn’t appear in a 10k. I wrote that we had tested $APP and ChatGPT ads for one of my businesses and the results were poor. A few people (🙏 @the_zack_zhu & @UvyatM), tagged @rfvivas, and not long afterward he messaged me and started asking questions about our experience. What interested me was not that he reached out. It was when he reached out and why. This was a Saturday afternoon, someone had publicly criticized his company’s product, and instead of ignoring it, or delegating it, he became curious. There was no prepared meeting and no obvious economic reason to care deeply about one relatively small advertiser. Yet he wanted to understand what went wrong. That is a tiny interaction, but tiny interactions can reveal how someone thinks when nobody is watching. Recently I had almost the opposite experience with @Stripe. We ran into a relatively straightforward problem, yet getting it solved through became incredibly difficult. Eventually I had to reach someone I knew close to the CEO to get the issue resolved. Another business I’m invested in recently had its $UBER Eats account hacked. After getting nowhere through the normal channels, I contacted Uber’s CFO @_balaji_km and he helped me almost immediately. Id like to publicly thank him because responsiveness from senior leadership may look trivial, but over time these little moments tell you something about the company. Obviously none of this means $APP or $UBER is automatically a great investment, nor does a frustrating experience with Stripe make it a bad company. That would be lazy analysis. But investing is ultimately the accumulation of lots of imperfect data points, and some of the most valuable ones are the ones you cannot extrapolate through reported numbers. Revenue growth, margins, free cash flow and returns on capital are all measurable. Curiosity, urgency, humility, obsession, responsiveness and the willingness of senior management to remain close to the customer are much harder to quantify, yet those qualities are often what create the financial metrics we spend so much time studying. Think about the sequence. A company that listens faster can learn faster, a company that learns faster can improve faster, and a company that improves faster can respond to competitors before the threat becomes obvious. Repeat that process many times across thousands of employees for ten years and what investors casually call “culture” eventually becomes market share, margins, retention and free cash flow. That is why I increasingly think of culture as a kind of invisible balance sheet. You cannot see it directly, but every day management is either depositing or withdrawing from it through the way people make decisions, respond to problems and treat customers. By the time the effects become obvious in the income statement, the real work may have been compounding for years. This is one of the limitations of purely quantitative investing. The spreadsheet is extraordinarily good at describing the business that already exists, but much less capable of describing the human machinery building the business that will exist ten years from now. Financial statements are often lagging indicators, while behavior can occasionally be a leading one. I think of experiences like these as qualitative breadcrumbs. One breadcrumb tells you nothing, but collect enough of them over a decade and you begin to understand how a business behaves behind the scenes. Sometimes that info becomes valuable long before Wall Street knows how to put a number on it. The best investors do not choose between quantitative and qualitative analysis. They understand the numbers, then keep searching for the things the numbers have not captured yet. Because sometimes the most important number in tomorrow’s financial statements begins as a behavior nobody thought was worth measuring today. 🌹