📰 I was on the news... Here’s what I learned

​ Think twice about reading this ​ Hey Contrarians, Things I think about daily: Big guys vs. the little guys. Wall Street vs. Main Street. Ivy leagues vs. the self-taught. Today’s newsletter is about that, but so is my entire mission… For years, I’ve been working to equip [a community of biz owners]( with the tools they need to follow my steps. Why spend 4 years and $100k learning acquisitions at a university, when you could be mentored for a fraction of the price by experts in the field, while you’re actually buying a business? This community is not for everyone, but damn if we haven’t packed in some serious value for those who use it. We’re about to raise its cost to $10k on September 15, so you’ve got until then to join for $8,800. To learn more, [fill out our questionnaire here](. Now, have you been keeping tabs on what Macy’s is up to? There’s a kind of crazy phenomenon happening across the nation… ​ Today in 10 minutes or less, you'll learn: ✔️ Contrarian framework: Second-order thinking ✔️ 3 terms you’ll hear more in the next 5 years ✔️ 2 key predictions for Main Street retailers ✔️ My (almost) awkward moment on the news ​ Contrarian framework: Second-order thinking Our first order of business today should be clarifying exactly that: - First-order thinking is: doing A will lead to B. Cause and effect. - The magic starts in the second order: doing A will cause B, and then what? Will it also lead to C, D, or E? The phrase “I’m one step ahead of ya” – that’s second-order thinking. All of this is hard because it forces us to consider the consequences. And we humans, we’re wired to focus on the bad ones. But what if we focused on the good? Codie, why should I care about any of this? I’ll tell you why. Because in business, as in life, predictions are everything and they ripple out. Some are good, some aren't. It’s knowing how to think about them that’s important. It’s second-order thinking that’ll help you identify the good ones, de-risk the bad ones, and spot opportunities for growth. ​ Sponsored by Percent The trillion-dollar asset class hidden in plain sight Stocks may get much of the fanfare in the investing world. But some of the largest investors are focusing their capital on private credit. These are direct deals between lenders and businesses that can often have higher returns. With Percent, everyday investors can tap into the asset class through deals that offer the potential for diversification, inflation resistance, and shorter timelines. I’m so interested in the idea, I’ve invested in Percent itself. As of August 31, 2023: - Percent investors have earned more than $32M in interest since the company’s first deal in 2019. - The average APY for deals on Percent’s platform is 18.65%. If you want in on private credit, they’re giving you contrarians a $500 bonus with your first investment. [Sign up here](). ​ 3 terms you’ll hear more in the next 5 years In 2016 (almost a goddamn decade ago), I [tweeted]() about a report on shopping trends. The focus of the economists who wrote it: Macy’s struggles, Amazon’s muscles, and what it all means for consumers. “What are the second-order effects here?” I thought at the time. All these years later, we’re starting to find out, and I was invited onto the news the other day to talk about exactly this. Man oh man, do I have thoughts… Here’s a general rule: If you own a department store so vast that shopping there burns off last night’s lasagna, you’re at risk of disruption. A first-order effect of Amazon’s rise is that Macy’s sales are [down](=). A second-order effect is that Macy’s is rethinking its strategy by investing in smaller “Market by Macy’s” stores in strip malls. This is part of a wider trend I’m calling Small IRL, Giant Web, and it’s reshaping the way we buy things. A wave – and I mean TSUNAMI – of second-order effects now threaten commercial real estate owners like Macy’s. Here are three terms you’re going to keep hearing as this wave hits: 1. “Functionally obsolete” For many retailers, the “bigger is better” era has passed. This is a first-order effect of the internet. You’re seeing Westfield walk away from the historic San Francisco Centre after Nordstrom shut its 300,000-square-foot store there. You’re seeing e-commerce account for [15.4%]() of total US retail sales in the second quarter, up from 10.3% in 2019. You’re seeing some [56.6%](=) of consumers say they prefer shopping online. Megastores, in many cases, are functionally obsolete. Expect more big box boutiques and delivery-only shops in the future. 2. “Extend and pretend” In real estate, this strategy is used by commercial lenders to kick the can down the road on costs or risks. They extend losses by pretending everything is fine. Kinda like this: Source: [Imgflip](=)​ Mega store owners like Macy’s are waking up to the smell of smoke. It’s smart to shrink new stores to 1/5 the size, but it’s also overdue. In my mind, after extending and pretending for too long, the violence of action becomes your only option. 3. “Skinny your SKUs” The average big box store might have thousands of SKUs (items) that today’s consumers aren’t interested in. No one wants to dumpster dive into floor 57 of a Macy’s. What’s coming is the age of curation, not optionality. Google and Amazon have cracked this code. They have limitless options, yet how often do we swipe past the first page? The future belongs to those of us who skinny our SKUs and curate the good stuff. ​ 2 key predictions for Main Street retailers The growth of Bezos’s baby… Large retailers opening small-format stores… With all this evolution comes all new possibilities, so let’s lay a couple out: 1. First-order effect: competition Just think, what happens to Main Street boutiques when Macy’s is all up on their turf? What happens to the local furniture shop when Ikea – known for 500,000-square-foot labyrinths – opens a cute [1,100-square-foot]() outpost just down the block? You don’t have to be Janet Yellen to know big biz encroachment probably isn’t great for small biz in the short term. But that’s why we love second-order thinking: it opens up doors for positive outcomes. 2. Second-order effect: Appreciation When big-box retailers bring their data and expertise to Main Street, we get algorithmically curated goods. Exactly what we want, right? Maybe not. Maybe this trend pushes people to seek further differentiation from the pack and buy local. Maybe the mainstream stores attract new foot traffic that inadvertently diverts eyes back to the mom-and-pops. Maybe, this pushes the bold among us to start or acquire small businesses whose slogans are simply: “We’re in this together.” ​ My (almost) awkward moment on the news So, remember when I mentioned I was invited [onto the news]() to talk about all this? That whole process isn’t something you hear about every day, so here’s what it looks like: 1. My agent pings me. I gauge whether there’s an interesting angle we can offer. There is. ​ 2. I call my commercial real estate guy at Colliers (Stan Sanchez) and ask him to talk me through national department store trends. ​ 3. I gather my thoughts on national chains dominating markets but changing footprints. 4. Ahead of time, I send some topics of interest over to the station. Sometimes the anchor sticks to them, sometimes they don’t. 5. I go on. ​ 6. Anyone’ll tell you it’s important you get to the point and back up your data. Mostly though, don’t almost have a photo of a naked chick scratched up by a wolf in your background. Not that I’d know. ​ Now, you might be wondering why I’ll spend a whole day prepping for an old-school traditional news segment in the first place. Here’s the deal: The news and its audience are like that quirky aunt at Thanksgiving. She may be a tad out of touch, but she’s got connections, and she knows people who know people. If a first-order effect of going on the news is that an aspiring business owner eating cereal in their bathrobe hears what I have to say, great. If a second-order effect is that I inspire them to take action, and they do, that’s a win. So that’s why I do this. I do it to plant seeds that help us deliver on our mission to support the world’s doers. I want you to be a builder in a world of users. ​ - Codie ​ ​ ​ 🌭 Ah, the $1.50 [Costco hotdog](, history’s greatest inflation hedge 🤝 Tom Brady is now a strategic advisor to… [A major airline]()? His career's really taking off, huh 🚗 Apparently Toyota sells [a $170k]( superluxury SUV. Who knew? 👮‍♂️ Why are we not surprised thieves are hunting for olive oil [as prices rise]()​ 🤖 AI? Intuit’s [into it](. The company is launching an AI assistant for small biz’s ​ Ready to become part of the Contrarian Crew? There are 2 ways to join: ✔️ Enroll in our [Small Business Acquisitions Course](). Learn how to build freedom and income through "boring business" acquisitions. ✔️ Join our [Unconventional Acquisitions Mastermind](). Learn how to buy your first (or next) business with our expert guidance, support, and accountability. What Did You Think of This Week's Newsletter? How ya feeling? Did we crush it? Blow your mind? Make you cry? How can we do better? Hit reply to let us know! Just didn't get enough? If you want the deeper cuts on business buying, we have another newsletter you might like... [Sign up free here](=). ​[Disclaimer – The “be an adult” section.](=)​ Make us sad and [Unsubscribe]( • Or Update [Preferences](​ 113 Cherry St #92768, Seattle, WA 98104-2205