Rejecting the “Hair on Fire” Approach to Business: Interview with Calm Capital Co-founders, David Horne and Marty Balkema

This week’s interview is with David Horne and Marty Balkema, the co-founders of Calm Capital, a holding company that buys and invests in profitable companies for the long term.

David and Marty met serendipitously while perusing the CD aisle at Best Buy. What followed was a friendship that grew as they each launched and grew their own entrepreneurial endeavors. Eventually, they found they couldn’t ignore an idea they’d brainstormed: What if they combined their existing businesses into a single holding company and used the cash flow to buy other profitable software and services businesses with established customer bases? In 2020, the idea became a reality when Calm Capital was formed. Since then, David and Marty have transitioned from operators to investors and hired leaders to steward the businesses in Calm Capital’s portfolio. Central to everything they do is the Calm Philosophy that rejects FOMO, focuses on continuous improvement, endeavors to achieve results by placing emphasis on profitability, and commits to holding businesses for the long term with no planned exit strategy.

I don’t often talk about my prior life as a growth equity investor, but I am deeply curious about “No Directions” approaches to investing in, building, and owning businesses. What options exist beyond the newsmaking approaches of traditional venture capital, private equity, and hedge funds? What does it look like to not “move fast and break things” and instead steward businesses with a focus on steady improvement and longevity? What does it actually look like to build a business with a sense of calm? Needless to say, I was intrigued when I came across Marty and David’s philosophy and approach.

Over the course of a wide-ranging conversation, I spoke to David and Marty about:

• How asking the question “What would be fun?” helped them settle on the Calm Capital approach

• What they’ve learned about cultivating patience and rejecting FOMO

• What conventional wisdom gets wrong about what makes a great leader

• How they work to give their CEOs and leaders permission to build companies in a way that works for them

• The way they each look to cultivate a sense of calm in their lives

Note: The following interview has been lightly edited for clarity and length. While every effort has been made to preserve the integrity of the conversation, please be aware that the quotes may not be verbatim but reflect the essence of the dialogue.

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How would you describe your occupation and what you do at Calm Capital?

Marty: I definitely have more of a bent toward the operational side. My primary eye is on the financial plan and schedule. Everything about what we do is cash-flowing. We have a schedule of those inflows and outflows, and we manage to that reality. Our businesses are managed by operators, presidents, and CEOs who are responsible for the day-to-day management of each business. I make sure that they have the resources they need and that they are unblocked in decision-making. I really try to uplevel them as a coach. I’m probably also the first one reading our legal documents and overseeing the vendors that we deploy as shared services such as fractional accounting, legal, and finance.

David: I’m involved in all of that but more directed towards identifying opportunities and helping with sales enablement and business development within our companies. I'm usually filtering out any inbound folks who are looking to sell their business and taking calls with family offices and other folks who are looking to buy things and partner. Marty is phenomenal at coaching our leaders and really creating an atmosphere for them to do their best work. I’m pretty good at special projects and dropping into the businesses. We both have to stay at 30,000 feet to keep an eye on the vision. When Marty drops down, he's dropping down to 15,000 feet, and I'm usually dropping down to the ground level for a period of time.

How did you land on this business model? You've both been involved in starting businesses. What led you to the holdco model rather than being in the weeds of starting new businesses yourselves? 

David: I’d been on my own for a while running an agency ​​when Marty left corporate America and started his consultancy. Even when we both had other full-time jobs, we were always working on stuff. Most people learn to focus on one thing and that can often be the way to go. However, when you put yourself in a scenario where you are working with multiple clients, and you’re able to survive that, you really learn how to compartmentalize. We thought a holding company would lean into our skills and the way we’ve operated our entire careers. The idea of a search fund didn’t appeal as much as finding multiple businesses and working with them the way we might have with clients at the agencies we ran.

That’s how we landed on the model itself. Then, the businesses we talked the most about were the ones that have been around the longest. We were less excited about sexy startups and more interested in long-term businesses.  We were also thinking about what we really enjoyed and how we define success. The people who own those types of businesses that have been around for a long time seem to have stable family lives, good friends, and were contributors to their communities. That’s not to say that’s not possible with fast-growing businesses, we were just going off what we’d seen from our own experience.

Marty: When I look back, it was really about admiring companies that had gone the distance and admiring things that lasted over a long period of time. We didn't like the hair-on-fire approach to work and life. We were inspired by Berkshire Hathaway and Constellation Software’s success, what Andrew Wilkinson was doing at Tiny Capital, and stories like Jason Fried leaving the agency side to start Basecamp. Those were the stories that really resonated with us.

The idea of 0 to 1 and the idea of a startup in general is great for some folks. We love business, but we also love it when someone already has product market fit and already has customers. They've already done the 0 to 1 work to become profitable, and then we can apply some of the playbooks that we've learned to get them from that point to the next level. That just sounded more like what we wanted to be doing. We were just constantly trying to align our definition of success for our overall lives with the work that we did every day and making sure that it was fun. We started seeing that we could have a lot of impact coaching and leading people across a variety of businesses. It really was as simple as that - we just thought it could be fun at the end of the day.

One of Calm’s key principles is avoiding FOMO and being patient. As we all know, doing that is easier said than done. What have you learned about cultivating patience? 

Marty: Who’s to say you’re missing out, right? Every day that you get up you have an opportunity to steward that day. That has a lot to do with how you define success. If we're talking purely business, the scorecard is usually financial. But there's so much more to it than that, right? As a business owner, you have employees, customers, and vendors, and there are a lot of people's lives involved. You have to take all of that into consideration. Who’s to say what speed is right? As long as we're moving forward, who’s to say that 5% annual growth or 50% annual growth is the right number?

The other thing I would say is that there are seasons. For example, one of the 2 acquisitions we made last year is seeing tremendous growth right now, and so we're in a season where we've prepared ourselves for this moment and are seizing it by putting our foot on the gas. It is a different pace this year. Could we run at this pace for years and years in a row? Probably not. We are pacing ourselves and believing that there will be opportunities. We're gonna put ourselves in a position to take advantage of opportunities, and then try to have good discernment about when we choose to act.

​​The work we do has rhythms to it. Right now, it’s a lot of networking, being patient, thinking, and reading. But when the deal and the game is afoot, we’re gonna go after it.  And then back to my previous answer, everything we do has to be fun. It's really just to say we don't abide by the world's view of what we should or shouldn't do.

David: When you're a consultant, you're conditioned to think fast and have answers at the ready. There's an incentive and perceived value for being quick and a perception that if you're not, you're missing something, or you're not good at your job or whatever. Not taking action as an operator is typically terrible, but as an investor or owner, not taking action is usually the best decision. When I think about FOMO, I think about on what horizon? If we’re missing out on a 10-year horizon, there’s a tension between long-term thinking and the reality that we’re not guaranteed another day. As Marty said, that’s the stewardship of doing the best with what we have in the present. That said, we’re definitely thinking about the long-term in different areas. I have a freshman in high school, and I might not really see the impact I had as a parent until he’s a parent. FOMO there isn’t about this week or month but on a much longer horizon.

When we have FOMO or are feeling impatient, it’s usually a symptom of wanting control. When we operate from a place of fullness, a lot of which is founded upon our faith worldview, then the patience and not succumbing to FOMO becomes a lot easier.  It's almost a nonissue when that's the case. I know you’ve taken up golf. In golf, you have to win each shot. You can’t be scared of the shot you're about to have. Your best moments are when you’re present and winning the shot. It’s a persistent challenge.

Marty: One more thing I would add. One of the things I really had to change my habits around was being okay with sitting with something and not checking things off a task list. I still battle it. The dopamine hit of getting through your to-do list is a huge asset for how I function. I'm really good at just making a plan for the day and nailing it. I’ve had to see that a lot of what we do is more thinking, more reading, more brainstorming, and more acquiring wisdom and knowledge from the experiences of others through books, research, and having more lunches, breakfasts, and coffees with other people (without an agenda or understanding of what you're trying to accomplish). That’s been a shift I’ve had to make in how I evaluate a good day’s work. David and I live about 3 hours apart. Some of the best work we do is when we’ll both go for long walks and talk on the phone. We usually have unlocks or some of our best ideas when we give ourselves the space to do that.

The final thing is that as we move from operators to investors and coaches, it’s become important for us to have fresh energy, ideas, and wisdom to impart on others. You don't know when you're going to need it. When someone calls you up and says, “Hey, I'm wrestling with this decision. I wanted to get your 2 cents,” you want to have prepared for it and have nuggets of wisdom to share. It’s been important for me to see that at work.

You’ve now hired a number of CEOs and leaders to run Calm Capital’s businesses. What do you think conventional business wisdom gets wrong about what makes a great leader and CEO?

David: Let me preface by saying I'm not sure I'm very good at knowing what the conventional wisdom is.  I think there is a lot more nuance to creating incentives than conventional wisdom suggests. ​​There are business outcomes and goals, but there’s also the individual and the outcomes and goals they want to achieve. We hire by aligning those incentives so that they are really excited about the opportunity. Being competent and good at the job is a given. Marty does a good job of finding people who are willing to bet on themselves. We extend an enormous amount of trust to that leader by giving them the autonomy and the reins to explore all the edges of the property so to speak. That said, they have to trust us and trust that we’re going to take care of them and make it a good experience.

Marty: Betting on yourself is a key attribute. People who do big things are really optimistic and audacious. I like the word audacious. They just really believe in their ability to get the job done, and they bring that enthusiasm, energy, and competitive nature into everything they do. I don't care if they're super charismatic and extroverted at all. I've heard somebody say on a podcast recently that small businesses are like waking up every day and going to a knife fight. There has to be resilience and grit to be able to handle that. 

I’d like to build on your answers here. What helps you empower your leaders to build companies in a way that works for them? It’s so easy to compare yourself to what other people are doing or what you think you “should” be doing. How do you help them approach their work from the perspective of: What do I think makes sense? What’s going to work for the unique company we’re building?

Marty: We’re preparing for an annual strategic planning meeting with our companies. I have three things that have been coming to me as we prepare for that: Clear objectives, autonomy to work toward those objectives, and incentives. As owners, it’s our job to give clear objectives about what we want to have happen with our businesses. Then it’s our job to be a teammate and help in the brainstorming process. But we have to give our leaders autonomy, right? We have to give them the autonomy to create and execute the plans toward those objectives. Then there have to be incentives that align everybody's interests across the short, mid, and long term. Incentives can be tricky - that’s an area we’re trying to learn about and get better at. Because of our cash flow holdco model, we are much more interested in incentivizing people in real time than in some future potential possible outcome. We don't have any time horizons or exit plans. These businesses are not for sale. It could happen, but we're much more interested in aligning incentives in real time.

David: If we are being too prescriptive, then there's not a sense of ownership and responsibility. I haven’t been able to find the source material for the study I’m about to reference, but I won’t let the facts get in the way of a good story. Apparently there was a study done where they had kids play in an area in an open field. They had the whole property to explore, yet the kids never ventured off. With a different group, the researchers put a fence around the property and told the kids they could explore anywhere within the fences. The kids then explored every edge of the property. I think there’s something to that - we want to lead but give enough autonomy that allows our leaders to explore. We give our leaders objectives, clarity, and accountability, but we don’t tell them how they have to accomplish those objectives.

Here’s an example: Last week we went and did an all-day workshop with someone who's leading operations at one of our software companies because we’d identified an outsized opportunity to improve one aspect of the business. We were talking about ways to improve the speed and capacity of the team installing the software. We generated all kinds of ideas but we didn’t say, “We want these initiatives to be done.” 

Marty: We all deal with seeing the forest through the trees. We're putting out fires, trying to make our numbers, trying to hire the right people. All that stuff is coming at you in the day to day management of a business. It's hard to get creative. Because of the way we’ve set up Calm Capital, David and I have the ability to drop in and add some perspective. We even saw that in our working session last week. I got really far down the rabbit hole of the numbers of it all, and David said, “Yeah, but what about the customer experience? We can't have them have a bad experience just to be more efficient.” That balance, the creativity, and supporting a leader who’s doing a fantastic job makes it all fun.

Running a business can be all-consuming. What do each of you do to cultivate calm in your life?

Marty: I’ve had to spend a lot of time working on this one. My faith is definitely core to everything I do. I think within that it’s been important to define what success looks like for me personally. My personal mission statement is around being a good and faithful steward. Being able to say you were given these resources and these opportunities, did you do well with them? It’s important for me to keep that front and center and know that everything is going to be okay in the end. It starts from there. The second thing I'd say is it’s a lot of discipline. Lots of good personal habits and doing things like investing in a good morning routine, plenty of sleep and nutrition, downtime, and allowing yourself to have days where you go for a walk on the beach or listen to music or a podcast. It’s been important for me to recognize that doing that energizing stuff is work. I could sum all that to say that I had to have a lot of good personal self care and take the time to create these good habits.

The final thing is that I have an amazing wife and 4 awesome children that I could spend all my time with. I'm really intentional about that. My wife and I have spent a lot of time talking about where we’re headed and writing stuff down. We can't control the exact timeline and every little thing in the future, but we know where we're headed. We're on the same page. We’ve talked to the kids about it. We've really designed our life on purpose. We recently moved to the coast of North Carolina. A few years ago we were doing 6 months in Michigan and 6 months in North Carolina. That was very intentional. We homeschool our kids and that’s all part of the plan. We have a dream of living aboard a sailboat. We’re investing in that from a skills and time standpoint so that we're ready for it. It makes it easier on a hard day to know where you’re headed and the dream of freedom that you’re building towards as a family.

David: I have to wrestle sharks to cultivate calm (laughs). I echo everything Marty said about vertical alignment around why we’re here and what our purpose is. My wife and two boys are amazing. I also think accountability is important. Marty and I keep each other accountable when we're burning too hot.  Our relationship is such that we can call each other out on that (if our wives haven’t already first). I think it’s also been important to have small groups of friends who get what this type of life is like. Days of solitude where you get away to think and ponder without any inputs are critical. You realize by doing nothing that almost nothing has to be done right then. As we’ve transitioned out of our other businesses and into Calm Capital, we’ve worked to create a lot of margin in our lives. There’s financial margin but also spiritual margin that comes in the form of personal time and the space to clear your head. There are so many benefits you see when you have that margin.