Leading Microcap Board Members: Charlie Frischer of Kingsway Financial Services (NYSE: KFS)

Charlie Frischer, lives in Seattle and is the general partner of LFF Partners, a family office based in Seattle. Prior to working at LFF Partners, Mr. Frischer held various positions at Zephyr Management, L.P., a New York based private equity firm (2005 to 2008); Capri Capital (1995 to 2005); and the Resolution Trust Corporation (1990 to 1993). Mr. Frischer graduated from Cornell University in 1988 with a A.B. in Government from the College of Arts and Sciences.

The following transcript is AI-generated and has undergone only minor edits. Please refer to the video recording for direct quotes.

Kai Sato: We're talking to leading microcap board members. Today, we have the fortune to talk to Charlie Frischer. How are you, Charlie?

Charlie: I'm doing great.

Kai Sato: Charlie, if you wouldn't mind, before we dive into some other things related microcap, please give us a little bit on your background. And, where you were educated and some of your work history.

Charlie : Yeah, I worked in commercial real estate for about 20 years, did real estate brokerage. I worked for the Resolution Trust Corporation in the late eighties, early nineties. Did commercial mortgage lending for about 10 years, mostly a multi-family but some commercial as well. And then worked for a private equity firm in Manhattan. Zephyr Management for four years, and we owned about 5,000 apartment units that we owned and we managed. And then, in 2008, I went out on my own, and I've been out kind of on my own managing our family investments since then. And, you know, I went to went to high school in Queens and went to Cornell, got a bachelor degree there. So that's kind of the extent of my educational experience.

Kai Sato: You're currently a director of Kingsway Financial Services. How did you wind up on that board? What drew you to the opportunity?

Charlie: That's a good question. The largest shareholder, Joe Stilwell, kind of reached out to me. I would talk to him occasionally as I was building my position, and we would just, just be kind of social and talk and ask some questions, nothing major. And then one day he came out to Seattle during COVID. We went for a couple hour walk. He told me he might be interested in talking to me about a position at Kingsway. And, next thing, you know, we've talked for about a year or so. And then the timing was right last May. I went down to a board meeting as an observer. They liked me and I liked them. So I decided to, they decided to extend an offer to me and I accepted last May.

Kai Sato: And obviously you've done a lot of different things, but have been involved with some other public companies. Are there any unique skills or experiences that you think you bring to the microcap boardroom in particular?

Charlie : Where I'm going now is I want to be involved with a company that wants me. And that I can help. I don't wanna fight and try to get into a boardroom where they don't want me. They're not gonna let me in. I've gotta fight. It's really hard to fight and win these things. It's emotionally draining. It's exhausting. If you don't get a full control of the board. If you get one or two board members, you're kind of a no man's land. So my, my new thing is if, if somebody wants me, I'm willing to join. But if you don't want me, I'm gonna look elsewhere because life's too short. I'm getting older. I'm 56. I don't wanna be banging my head. Trying to knock down. You know, people who's incentives clearly are just different than yours. And if, if the incentives aren't aligned. You're you're dead and that's, that's been probably on the ones that haven't worked with me. And there's plenty of that. Haven't worked. It's always the incentives that are different.

Kai Sato: Can you expand on some of those instances? What are some of these common challenges that these microcap boards face?

Charlie: Well, my theory is if a company is a hundred million market cap, and it was a hundred million market cap, five or 10 years ago. It's not going anywhere. There's a lot of things that happen in business. You get to buy things; you get to sell things. You can do transactional; you can grow. There's a lot of different things you can do. If you haven't changed your market cap in 10 years, you're not gonna start changing it. And it's taken me a long time to kind of realize that. I mean, there's enough things to do. The bell rings a lot. There's opportunities. And if you're stagnant, it's because you're either comfortable. The situation's really good for you. You're the CEO, you're making a couple million a year. You know, a sale of the company to make you 5 million in your stock, doesn't match the million who you're making in salary. So the, the incentives it's more than incentives. The playing field is different. And so, what I'm trying to figure out is I wanna be where the management team and the owners. Are are, are playing and try to score touchdowns in the same field. And one guy's not playing Frisbee one, guy's playing golf and we're in different worlds.

Kai Sato: Got it. Yeah. As, they say, if a microcap is a microcap for too long, something’s wrong, right?

Charlie: A hundred percent and, you know, if you’re not growing, you're dying. So, and all you're not shrinking, but through buying back shares or something, and most of the time. If it's really well done, it won't be a microcap forever. So what's the status? Why is it where it is? What's the transition. And of course, catalysts. I was stupid when I was young. I thought, oh, you know, all things will rise to the top. Value will emerge will no problem, you know, in a long run, it's a scale. In the short run, it's a voting machine. And, you know, Graham was right about all these things, and I thought they didn't matter. Of course, they matter. And, unless you wanna be in these value traps, these crapy investments. So. Seeing something changing is really important.

Kai Sato: Sure. And a lot of it comes down to the Buffett-ism of working with somebody that you like, trust, and admire.

Charlie: Yeah, there's not that much of that in the microcap space.

Kai Sato: Well, without digging up too many wounds, can you talk about some
of the past boards, things you learned, and even some mistakes?

Charlie : My first 13D was a company called New England Realty. New England Realty owns maybe now they own 5,000 apartment units in Boston. I learned about it in the late nineties. I filed a joint 13D with a couple friends of mine who were in the apartment business. I knew the assets as well as anybody in America; I'd visited them multiple times. I was doing multi-family lending. I knew the caps within a quarter point. And knew the stock was 40. The assets worth 180. Had a small dividend. It was an old guy who ran it, who was very, very tough. Very smart. But he wasn't interested in selling the company. He wanted to keep running it. He enjoyed going work every day. Harold Brown was his name. I don't know, maybe he was, he's passed, but he was probably 85 or 90 then. And he liked going to work every day. And so here I show up and say, oh, I'm here. You know? Oh, buy some shares back or sell the company or put it up for sale. He's like, we're not doing that. So we messed around a little bit. We filed a couple of amendments to the 13D and ultimately he ended up buying our shares out. And at the end I was, I was haggling with him over the last 50 cent dividend was how, how we ended. And then, so after, begged him to give me the last 50 cent dividend. We settled and made some money on that, but, and, and the company still exists. I’m very small shareholder now 20 years later. The assets are probably worth 50 or a hundred percent more than the stock price. They're never gonna sell. It's literally 23 years later. The mark cap's about two or 300, you know, maybe it was I'll make up the math that were 3 million shares. Maybe at the time I gotta get my math. I didn't know. I think I'd be talking about this. Maybe it was a 60 million market cap. Now it's 150, 200. The asset are probably worth 500 or 400. You're never gonna crack that egg. You know, if you own it, you just gotta know you might make 10 or 12% a year, but you're, you're not gonna have a liquidity event ever.

Kai Sato: As you look back at your experience, why are so many kind of high net worth and family offices drawn to the microcap space? Is it because they can affect change? Is it because they're overlooked? I mean, Buffett himself started as very much an activist in the microcap space.

Charlie: You know, I think when people look at microcaps, they screen them. And there's a bunch of them screen at five times: five times cash flow, five times earnings. And then I think they come to realize. That, yeah, there's always an issue there. The founder is small minded. The board is small minded. They have the wrong incentives. They're not interested in growing. They they're interested in drifting. There's all these different things. So there's a reason these things traded when they traded five times, it's not this lovable, oh, if we were just waiting for you to call. And once you called, we would then show our goods to the world, and our stock would double or triple. There's always a story. And, you know, as an investor, you've gotta kind of dig in and hope like hell that they're gonna do the right thing. It's not clear they are. And because they'll tell you they are. But at the end of the day, who knows what they're gonna do?

Kai Sato: Can you talk about the CEOs of microcaps in particular, you've dealt with a lot of different ones? What do the great ones possess? What skills do they need?

Charlie: Well, I would say at Kingsway, JT Fitzgerald, who's the CEO, is really talented. He's a smart guy. He's the right age. He's 50ish. He's been around, but he's not, you know, he's in that sweet spot where he's really knowledgeable but still has a lot of energy. We have a program and a strategy of sponsoring 30 something men and women with very high qualifications. Either they've gone to a service academy, or they've gone to Harvard Business School. In many cases, they've gone to both. And we're gonna, we're gonna set them up. We're gonna help them find a $10 million business to run. They'll be the CEO. The business works that well. They could make a lot of money. And, JT is really good. He's disciplined. He has the same incentives we do. He wants to do the right thing. He's not a showman. He's not trying to, he's not PT Barnum. He's not trying to sell everybody so that he can take some money off the table and then walk away. So, and, and he sees the potential that, you know, we're at 200, 220-50 million market cap. You know, we could be a much bigger company in five or 10 years, and we should be. We've got a great balance sheet. We can fund the growth. So JT is really terrific. And, I'm thrilled to be working with him. In other cases, the management team is wealthy already, in many cases. They don't have a lot of incentive. They belong to their favorite country clubs already; they have got a vacation house somewhere where they like to go with their friends. And they don't really need to change too much to get the lifestyle that they wanna have. So in that case, where are we gonna go? And they're not gonna be, they're not gonna play ball in terms of trying to create some value for shareholders in many cases. So I, you know, maybe people are better at picking CEOs than I am, but that's what I found a lot.

Kai Sato: But especially in this environment, how have things changed? As
valuations have come down as access to capital has become much more challenged, have you seen things shift at all?

Charlie : Well, my gut feeling is if you did an analytical review of activists, for instance, there's a lot, there's a lot less activism going on. It just feels like 10 or 15 years ago. There were just corporate raiders galore and people have realized it's a really hard way to make a living. So if your plan requires you to change the board makeup of a company, good luck. I
mean, there's some very smart guys and a couple women that are doing it, but the pool's getting smaller. Because even like with Bill Ackman, who I think is a very smart guy. He's not doing activism anymore. It's not worth the brain damage. It's easier to go buy half a billion dollars worth of, you know, Starbucks stock or Chipotle stock or Hilton stock and just be a cheerleader. Pick a good, make good decisions up front that are with companies that aren't broken cheerleader, the hell out of them. Try to have, 'em just keep 'em on the true and narrow and you probably make a lot more money, a lot easier, and you don't have the heartburn. You don't have to go fight Carl Icahn on TV and yell and scream about your favorite short or some other activist and go fight with Leon Coopermam about, you know, some payment processing company. It's just, it’s just a crazy way to try to make a living. So I think that's why there's a lot less of that going on.

Kai Sato: Yeah, you're probably right. I've only had a couple of conversations with you, and I seem to learn a lot in each one. What advice would you have for people who want to be on these boards? And I'm not saying I want to, but people want to serve on these microcap boards or getting involved with this ecosystem. What would you share or convey to them

Charlie : Well, I think that, keep in mind, if you're a CPA and they want someone on the audit committee, that's the one skill that they really they find attractive because it's always hard to find people to sit on audit committee. And so that that's, that's the one skillset that is really valuable if you're like a 55 year old. Retired, you know, CPA from a from a big firm. There there's gonna be a demand for you because you check a bunch of boxes. That that's one thing. If you, if you're a shareholder, many times, well, I should say sometimes, they'll be attracted like at Kingsway, they liked me because I owned 7% of the company. Most places they're gonna be repelled if you own 7%, because the last thing they want is somebody who's really motivated to try to make make change. Because nobody really wants change. I'm working on getting on another board shortly, and I think it's gonna work out well. And it's, I don't wanna mention the name, but it's a board. It's a microcap, but it's one where there's a very large shareholder who I've gotten to know. He and I get along. I think we would work. You know, we, we, we have the similar. Ideas about where the business should go. And I think, you know, I own, I own, you know, two, 3% of the company. He owns a lot more and I have some, I have some applicable experience. So that would be interesting, but I only want these things where somebody wants me. I don't know if I, if I answered your question but that's kind of how I see it.

Kai Sato: I think it's the inevitable progression. I mean, you very much sound like the, the Berkshire evolution, Charlie, of going in and, you know, the Sanborn Maps of the world and things like that. But, the reality is over time. Time is our most valuable asset. And you don't want to spend time with people that you don't like or you butt heads with. And so, you know, it seems like there's a lot of shareholder alignment, obviously. Kingsway it's all public. There's a significant ownership piece, not only by you, but by the board and by management.

Charlie : Yeah.

Kai Sato: And, and so, you know, those are the types of things. Can you, please don't mention the company, but what is, what is your process? Is it, you find something you like? Is it, you get to know people, just like you did with Stilwell, and then you just start accumulating shares? And before you have to disclose, you try to make sure that it's a good marriage?

Charlie : You know, I had a company, like 20 years ago, 15 years ago, Presidential Realty. And I made some phone calls to the CEO. Thought he was really nice. Very likable. He said all the right stuff and they, they didn't do well. And it's funny, you know, you, so I hung up. And I got to know him a little bit and spent a little time with him, and he said all the right things and did all the, you know, all that. And it just wasn't. You know, it was it wasn't I got kind of, you know, I didn't make a good, I didn't make a good judgment about that. And that was a super micro and it really. Well, these things happen. I think you have different techniques, right? You have, I, everybody has a sort of an investor network of people. They talk to whether it's two people, 10 people, 20, 30 people, people you read about all different. There's all different information now out there. And, and you come across things that look cheap, you kind of. Somebody kind of gets 20 minutes or half an hour of your time starts spinning you to the story. And next thing you know, you're looking Qs and Ks, and some proxies and some investor calls and you start to kind of dig in and next thing you know, you bought, you know, if, if the way to avoid losing a lot of money is not by one share. If you don't buy one share, you could never get to a billion shares or I have a million shares, so I should be more careful. When I buy my first year, probably because it's probably gotten me in more trouble. If you didn't buy the first one, you can't buy the last one. I know that's kind of self explanatory, but it's, there's a lot of truth to that. And then you just get involved and the story just has a way of winding through and you end up on the island somehow. And you, you know, sometimes you don't quite know how you got to the islands. It's cheap. And then you get like at a downturn with maybe like in the last week or so. And something that you're paying forward is 30. And next thing, you know, you keep buying and you wake up one day and you keep, somebody's keep selling you. And, you know, you own four or 5% of the company. It, it doesn't take that much 1%, 2%. It it's funny thing how that happens, but it doesn't take that much to get there.

Kai Sato: Sure. Sure. Was there anybody who taught you the ropes in this? I mean,
you you've been.

Charlie : I wish there was. I would've.

Kai Sato: It was it all just try trial by fire and you just had a lot of
sleepless nights?

Charlie : I well, like, I think like a lot of people, we, you know, we went and we read all these Buffett letters and Buffett is great. I think, I'm a huge fan of Warren Buffett. The problem with Buffett is he makes it seem easy. You know, you read 30 or 40 years of letters. You attend 10 or 20 annual meetings and, you know, he kind of. He, he, he spins a web excuse the pun. That you, you know, you could almost do this at home. If you can control your emotions and you, you stay away from as, as, as Charlie Munger says, you stay away from booze and you stay away from leverage and you stay away from drugs and drinking and you just focus. Everything will work out for you. And it turned out. I think he, he does. He doesn't mean to, but I think it's highly misleading because I think it's a lot harder than he kind of makes it seem. It it's a, it's a very tricky game. That the game's gotten tougher. There's a lot smarter people. Now than when I started 20 or 30 years ago, the number of people looking at deals that if you find something that's cheap, this there's five people already kind of milling about. And that was not the case. Before I, I have one investment, which, which will go nameless. A Canadian company. Where it is remarkably cheap and the company's done all the right things and NAV is two or three times more. And it's, you know, this is something I, I would've had 10 of these 20 years ago and I've got one in my portfolio that is universally cheap. I don't talk about the, about it, because it's microcap. They're buying some shares back. I don't want any competition with the company. But in general, those are very hard to come by now. The world has gotten very efficient. It doesn't mean that there aren't inefficiencies. But few, fewer. Real quickly, in 1999 or 98, there was a REIT called Center Trust and they owned shopping centers from Seattle to San Diego. And I happened to be in LA for a week on business and a couple extra days. And I went and visited all their real estate. And it was clear after like two or three days of visiting the real estate. It was spectacular. This was like a $4 stock. It was worth seven or $8. Nobody was doing any work on this. I, I, I made some money. I, I sized it. Okay. I didn't, it wasn't perfect sizing. I should have had 30% of my portfolio. I didn't probably had five or whatever it was. I mean, I put, I put a little book together, talked to some people about it. Nobody was interested. And ultimately did really well. They got bought out and the company that bought them did really well. But these things were around, and you could find them. They're hard to find now. I used to do a lot of this in the real estate side, there was a company called SLO properties, which owned properties all over the Southeast. And, my old company when we were in multi-family lending would give me an intern for the summer. And I took the intern and I and another guy worked with and we spent two weeks driving all over from Louisiana to Florida, visiting virtually every property they had, it was clear. It was worth way more. The these things are hard to come by now.

Kai Sato: I know Center really well. I started at Macerich. Mace Siegel was the quintessential mentor in my life until he passed away.

Charlie : Okay.

Kai Sato: Yeah, I was there when our stock went from 95 to five,

Charlie : Yeah,

Kai Sato: but yeah,

Charlie : well, I was buying at four and a half and five and that,

Kai Sato: there.

Charlie : that.

Kai Sato: I, my cost base got down to about 13, but I didn't know what I was doing. I didn't know how to size and I didn't have much dough at the time. So it was.

Charlie : Well, what, like, so that property, like an Oceanside and you go there and there's a Big5 and there's a shopping center. There's a supermarket and some other stuff and you realize this is valuable. And then they had, they own the IKEA in Burbank. I mean, you, you just went, I, I, whenever I saw was like, this is all, you know, this is. Even before, you know, the internet and everything else. So it was maybe, you know, like I said, 25 years ago, whatever it was, but all the assets were really good. Yeah. I probably saw 25% of the portfolio in those few days. And there was there wasn't a week, one in the bunch. So. There
you go.

Kai Sato: What was, what was one of your first or favorite microcap wins?

Charlie : Oh, well, Oh, I owned 4% of the preferred shares of McGuire Properties in 2010. That was interesting. They. It, it had it, it had a great move. I sold, well, I'll explain. I bought some at three. And McGuire was interesting is this is like in 2010 that, you know, it's all, it's all office buildings in LA. And all kind of Beacon Hill area and all these great buildings, but they were all fully levered up. But what happened is there were 20 buildings and they were not corporate. There was no corporate financing. It was all individual loans on each property, so they could lose 10 of the 20 and you'd still be okay. And I remember talking to people who were incredibly smart and way more about like the local LA market than me. And they would just say, they're gonna, they're gonna go bankrupt. They're they're out of business. McGuire's done, he paid too much. And I said, well, how are they actually gonna go bankrupts? I, you don't understand how. The, the leasing spreads are no good. They're gonna go bankrupt and. What was interesting is nobody had looked at the real estate people, not the stock people, the real estate people just knew that the portfolio in general was over leveraged, but they hadn't done the work to say, well, five of these don't have that much debt. Five of these are over leveraged. And to realize that there was gonna be some residual value. So I started buying it three. Went to one, Michael Ashner bought 10% of the preferred at a dollar. So then he wanted to buy 25%. He wanted, he submitted a waiver to Nelson Rising to buy 25%. Nelson said no, right after I saw Michael buy it, I knew Michael did really good work. So I stole his work and I started buying and oh, own 4%. I knew everybody, everybody was talking to me, then I kind of really got to know all the holders. So I was really kind of a little bit of a nexus of finding it all instance for information. The preferred, we were entitled to a board seat and the CEO, you know, it says, oh, come down and, you know, meet with us. And then I went to their nominating committee, a couple guys who, who I didn't like very much. Interviewed me and like kind of grilled me as to, you know, why I should be on their board. Meanwhile, they hadn't bought a share. Ever the stock had gone from 20 to three. You know, I mean, it was kind of, it was kind of galling that, that the attitude. So they ended up not putting me on the board. And then the stock. I know my cost basis might have been three or four. It went to 12. I sold, it went to 25. Brookfield bought. Them the stock, the preferred was 26 and then. Brookfield kept the preferred outstanding. I think the preferred, you know, like three, $4 again. So it, it made a complete utter round trip. And in LA downtown LA office building has been really tough. But, but it, and when I sold it 12, I was like, boy, you know, I felt like I was a loser for leaving, you know, a double on the table, but you know, this happens.

Kai Sato: Tough, tough. Can you touch on maybe the, the best microcap you've ever seen. And you can, you can dip into your portfolio if you want, but what was something, you know, everyone loves to talk about Amazon or Walmart early days or Netflix. Some of these that really grew up as small public companies, is there one that jumps out to you?

Charlie: No, because I'm just not that good at investor. I, I've never, I've never cause, well, I'll tell you why that is so. Look, I I've known about Costco like everybody else for 25 years. So when I lived in DC, we used to shop at the, the Pentagon City, Costco, crazy busy, really one of their best stores in the country. This is 12, yeah. 20, 25 years ago. And you could see the place is great. We all love going there. We love to shop. Everybody's happy at Costco. It's a fun day for the family. And, and you look at the financials and the financials are terrific, but it's 21 times earnings or 20, you know, 21 or 18, not 20 18, 19 20. And you say, well, gosh, I can't pay 20 times. You know, this is, they have 850 some odd stores now, maybe they had a hundred or 200 then. Maybe fewer and you see, I can't pay 21 times earnings for you know, retailer. No one does that. You can go buy, you know, mediocre retailers for 10, how could you pay 21? And so I didn't buy it. I bought like 300 shares or whatever I bought, but, you know, I could have bought that and been done. You know, and, and. Ended up in the Hollywood Hills somewhere. And so that. That didn't happen. I said, well, it's too expensive. And now fast forward earnings grow at 12, 13, 14% a year. For 25 years, the stock ends up at trading at 30 times earning. So the things are grand slam and there was a joke like eight or 10 years ago, a Buffett Buffet. Who's, you know, Munger's been on the board of, of, of. Costco forever at the annual meeting in, in Omaha says, you know, Charliem Warren, you probably should have bought some Costco. And Warren says, you know, Charlie enough for the Costco. And then somebody I saw like that happened like six, seven years ago. And Buffett said, well, I'm not doing the Costco and Costco's gone up like two or three times since then. And it's beaten almost every investment. With the possible exception of Apple. I think it even beat Apple. Since that time. So like, you know, I think one, we, we all make a mistake of it's it's it's it's had its run. It's too big. It's not gonna grow anymore. And that that's a mistake. We all make the, to answer your question, it wasn't a microcap, but 10 years ago, a guy said you should look at TJ Maxx. And I looked at the balance sheet. That it was simply the very best financials I'd ever seen in a company. Have. I mean, Plenty of cash, crazy cash generation. Wild returns on equity in the 30, 40% range com store sales that had done four, five, 6%. Forever. Just a wonderful business. Just if you were gonna, you couldn't have written better financials if you made 'em up. And so, you know, I, I owned it for a while and it, it did. Okay. You know, you, you. I don't know, you know, I don't know. I ended up not owning it after a while and I, I don't, you know, these things sometimes, but, but like there, there are some incredibly good businesses, by the way, one small thing is that. Because whether it was the industry or the business or off price or whatever it was. The CEOs of TJ Maxx. And Ross and a couple of others were grossly overpaid. And they got away with it because the businesses were so damn good that these CEOs would get paid you know, routinely 10, 15, 20 million a year. Now, maybe they were the, the world's greatest CEOs, but it's hard to imagine. There were, there were two or three CEOs in the exact same industry that were all that good. You know, it was, if it was one CEO, it would've been okay, but with three or four of them in the same industry, all making that much, clearly they happened to be in the right industry with crazy returns and equity with lots of you know, stuff was coming in their, their pack away. And, and that was all happening. So they had great prides and they were in the right place, the right time. So, but, but that, that's probably the best balance sheet I've ever seen is like the 10 year, you know, that you, you pull, but you go back and you look at the, the Ross Dress For Less balance sheet from 10, 12 years ago, you you'd be shocked.

Kai Sato: Yeah. Yeah. How about some board members? You've mentioned a couple of them. Are there, are there people who you just find to be exceptional microcap board members and you tend to try to align with them and, and be involved with the same companies?

Charlie : I want that. I don't have that right now. I there's a, there's a couple of people who I think are good. But I, I'd like to have a list of 20. Who I really know. I don't have that. I don't, I don't have that network. I wish I did. Who I'd say, look, this, this, this person's a winner. Wherever they go. It's good. Things happen. And I, I, I, I need to work on that. That's on my to-do list. That's a good question.

Kai Sato: No, but it's, that's, it's all about the people. Right? What, what I didn't know is that these are publicly-traded startups. And, you know, early on, it's all about finding product-market fit and then proving that you can scale it. And then, once you've got a real cash cow, then it becomes a capital allocation play. And so it requires a very different skillset, but I think you mentioned JT and KFS, like it's a, it's an incredible turnaround story or it could be, right?

Charlie: It is.

Kai Sato: It.

Charlie : And it, it happened long before I got there, but, you know, JT and the board had been trying to fix the balance sheet for five years now. It's only the last six months that that's come to fruition. But you know, as, as, as Bezos says it, if we have a good earnings quarter, it happened three years ago. It just shows up now. The the other thing, which is tricky about time. Is if you join a board. It is not gonna be in three months or six months. Everything changes. It's gonna take you a couple of few years. So if you're. If figure two,
three year process to kind of make things happen. And so people can say, oh, Billy Smith. He's a great board member. So if, if you're, if you're looking for that and the person does it once you don't know if it was him or you, the board members, so to build a track record of having two or three or four experiences where that person was a good board member and they went and they. It's it's really hard because unless that person starts, when they're 35 years old and now they're 50. Or if like, you know, if, or if they're 50 they're 65, they may be slowing down. So it it's a, it's an interesting question is. The cycle takes couple a few years. So, how do you find that board member who was on his fifth board? I think the best you could do is maybe have one or like he's been a CEO or he's been somehow instrumental in only one or two companies. You're not gonna get may. Maybe you, you know, Kai, but I think you have a hard time finding somebody who's been on four boards because there's just so much time in the world.

Kai Sato: Yep. Well, I, I think you hit the nail on the head. It has to be somebody who is, you know, young and vivacious enough but not too rich and lazy. And how many,

Charlie : Yeah.

Kai Sato: I know way too many guys with their own family offices or whatever they're doing these, they, they don't want the liability of sitting on a public board, especially a smaller one. But. And I, I think what, what is among my biggest goals in doing some of this stuff, Charlie, is we elevate by having better alignment but also increasing the talent level. I think that's what I've kind of noticed. And, and I'm not a biotech guy. And I don't understand things that need FDA approval, but somebody who's actually building and selling a product. That just happens to be a smaller public company. I think that if you give the right people enough time, they'll they can find it. But a lot, most of the microcaps that that I've seen, I mean, they wouldn't get into Techstars, where I'm a mentor, or some of these just standard accelerators, because they're terribly unsophisticated and they're completely misaligned. And, they're effectively trying to be become meme stocks. So just trying to find the ones.

Charlie : And, the CEO doesn't want to give up control. You know, I'm involved in, in one drug company and the CEO, if he became the chairman and brought in a new CEO in, like the number five person from Merck to, to kind of really run the play place, the stock would double or triple and no time we'd make a ton of money and he probably will never do that. And that that's really a bummer. And,

Kai Sato: You.

Charlie : and,

Kai Sato: Yeah,

Charlie : and no,

Kai Sato: sorry, go, go ahead.

Charlie : No, it's, it's really, it's frustrating. It's not gonna happen. Through back channels, people I know, and this story and other people who I'm involved with have, have tried as hard as they can to get him to change. The board's weak. He doesn't want the supervision. And it's really frustrating. And this is something that clearly would, would take off with, with, with a few changes to the board. And when one new CEO. And the CEO will just not do it. It's really, it's a bummer.

Kai Sato: Yeah. Well, you strike me as someone who is very comfortable with numbers and you, you get the financial side of it. How much do you think about culture and the people? You know, at the top and the bottom, everything just, the organization really buying into something.

Charlie : Well, I look. Naively, I think the culture starts at the top. And the CEO and the executives have to walk the walk and talk the talk, they have to not be grocery overpaid. So, you know, watching costs is really important, in every business. And if your costs are outta control, And, and it starts at the top. So if the CEO is overpaid, the CFO is gonna be overpaid. The whole, the accounting department will be overpaid. The, the, you know, the chief technology office is gonna be overpaid. If everybody's tight, then you know, if the CEO is gonna travel and first class, everybody else is gonna say, well, if he's the it, and maybe I can, if he's, if he's traveling coach, no way you're gonna be traveling, you know, first class. So this stuff. All kind of starts at the top. The the leaders set, set the, the whole story. And if, if you, you will, you. Know, I used to go to, I used to be a shareholder of Cedar Fair. You know, they own amusement parks, and I would walk around the park couple times with Dick Kenzel, who ended up being a little bit of a goofy guy at the end, cuz he tried to take over the company on the cheap. He got stopped by an activist and in Texas, but when you'd walk the park with him, He would pick up trash the whole time. And I don't think that was an act. I think cleanliness was important. He wanted to keep the park clean. And he knew if the CEO was picking up trash along the way, there wasn't an employee in the park that could say, well, I'm not gonna pick up trash. I don't have to. They, they see him doing it. So, you know, it's, it's cliche to say you'll lead by example, but the, these things do matter. And I think that, that's where the culture kind of starts.

Kai Sato: Well said, well, I've taken up plenty of your time, Charlie, but I always learn a lot when I talk to you. Is there anything else that you want to throw in here as we try to not only raise awareness for the right micro caps, but really the boards that are helping lead the, these companies.

Charlie : Yeah, look where I'm going is, if you are a somebody who, who, who it looks like can help a microcap. And you have an interaction with a CEO. Or another director and you've expressed an interest in serving, and it's pretty clear to you that you can help. And they have no interest in you or they don't engage with you. They're sending you a signal. And take it, take it at face value. Take it as if they really don't want your input. They don't want you around. They don't want you telling how to run their business. If they'd have
discussions with you and they want, they think about having you join because of something that you can improve or help them with. Then then you've got something that's highly constructive. So that's where I want to go. I wanna be on boards that, if I show an interest to be on the company and they're reciprocating, that's a winner. I don't have to go fight them for the next five years if I get on the board. So that that's, that's the goal. So I, I guess the advice I'm trying to give to people is look for those kind of opportunities. They'll probably be far more productive and enjoyable than, than the battle royales that you could have with people.

Kai Sato: Yeah, well, the push you on that a little bit, because you mentioned, Hey,
if you, if you have a, you’re a CPA and you can help with audit. What are some of the other big things that people need, right? You're either making a product or you're selling a product.

Charlie : Yes.

Kai Sato: So what, what do you, you know, what else do you think a lot of these microcaps are in need of, whether they can admit it or not?

Charlie : Well, one, one thing they do need is they need diversity. So if you're a, you're a person of color. You're a female there's there's certain check the box, things that are gonna help them. And it's hard to find in many cases. There's there's lots of terrific candidates who are people of color, but maybe that people don't know who exactly they are. Another thing. So if you, if you have a good resume and, and you'll be good for them, and they'll be good for you, that's an area where you can use that to get on the board. That might be really helpful and then help to come as well. Not just to be on there because of your background because you, because you could help them. And so I think that that's, that's an area where people can really be proactive. And, and, and, and do a lot of social good because I, I will say this, if you have one person of color or one woman on the board or other things, you, you do eliminate some of that. You that really is that locker room chatter and that some of that kind of old school stuff that just goes away. And I think so. I think this is important that, that you have a diversity on the board with good people. But so that, that everybody's kind of acting in, in, in a rational way. And they're not just a bunch of 15 year olds. I've got a 15 and a 13 year old, and we need less of that in board rooms. And we need more, you know, serious people who are not, you know, running around being, you know, silly.

Kai Sato: Well said, well said, Charlie, thank you for your time and keep up the good fight out there.

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