As I See It!

The Newsletter of Capital Consultants Company

October 2010

Vol.1, No 4

As I indicated in my last newsletter, the 2010 College Football Season is well under way. Mississippi State and Auburn met for the 84^th time on ESPN’s nationally televised Thursday night game, and the outcome was as I predicted. Auburn won as usual, 17-14. The score was pretty indicative of the game: lots of defense, not much offense. Of course it was a high-scoring rout compared to the last Auburn –State football game in Starkville which ended 3-2 with the bases loaded.  Auburn has moved on to 6-0, including pretty convincing wins over Clemson and South Carolina. The Western division of the SEC looks mighty tough at this point. LSU and Alabama are also 6-0, Mississippi State beat a foundering Georgia team and Ole Miss spanked Kentucky. Arkansas is 5-1 with a close loss to Alabama as its only defeat. Alabama rolled over perennial powerhouse Florida in convincing fashion, and in the process, threw the Eastern Division into a wide open race. The Old Ball Coach derailed Nick Saban’s juggernaut or at least delayed it. Les Miles will be spitting in a swinging Coca-Cola bottle at half time next week. Talk about lucky.

                                                                                                                              Investing In Private Equity

Things have been kind of quiet on the private equity front during the last month. Earlier in the year, I made an offer to provide capital to a company that had been struggling along and breaking even for the past five or six years. They were one of two players in a very narrowly defined niche market. My due diligence indicated that an infusion of growth capital, along with buying out the current owners, would offer a very interesting situation. But there was a substantial difference of opinion regarding the value of the current ownership group, so my investors and I took a pass. I still think it would work at our evaluation, but it does not seem to be in the cards. Like the song says, “You got to know when to fold ‘em.”

Finding myself with a little free time, I was rooting around in my highly organized business achieves. In other words, I drug a corrugated box out of my mini storage unit and started to sift through it. This particular carton had been packed up in the fall of 1982. I had sold my interest in Lawrence & Co., our Manufacturer’s Agents business, to my brother, Steve, before pressing on to Memphis to work for my friend, Don Clanton, at Union Planters Investment Banking Group. I shudder to remember when Don first asked me to come to work with him. I had to ask what exactly we’d be doing, and he said the UPIBG was in the bond business. I quickly told him that I doubted that I would want to do that. First I didn’t want to work at night, and secondly, jails depressed me. I can still see the look on Don’s face when he said, “You idiot, its government bonds, not bail bonds.” It was an auspicious beginning to a career in finance.

Anyway, I was digging through this box of old junk when I came upon the material that Steve and I had been given at the only sales meeting that I ever enjoyed. Lawrence and Co. represented one of the fastener divisions of Illinois Tool Works, Inc. ITW was the premier developer of specialty fasteners in the world at the time, and one of the most technically sound companies we represented. They held their annual sales meeting at their headquarters in Glenview, IL, which we were required to attend.

The first evening was devoted to wining, dining and pep talks by ITW executives. Early the next morning we got down to business. Normally, the company involved would spend the next two days giving the sales force more information than they wanted on fascinating subjects like quality control and sales service. This was entirely different. About thirty of us gathered on both sides of a table made long enough by pushing two tables together in the company cafeteria. The ITW Director of Research, a brilliant scientist that personally held several hundred patents, addressed us. He stood at one end of the long table and rolled out white butcher paper down its full the length. He then asked each of us to mark off our personal space on the butcher paper and sign our names. He then told us to write in the top left-hand corner of our space any ideas we had for a new fastener or an improvement to an existing fastener. We were told it did not matter if an idea seemed silly; just let our minds rove outside the box. After about 10 minutes, he told us to initial and date our ideas and to move one seat to the right. Now we were all face to face with someone else’s ideas. He suggested that we read what was there and add any suggestions that we may have to help or improve the original idea. When finished, he told us to sign our additions and move to the right again. At this point he stopped and explained that when we had made the entire circuit, he would roll up the butcher paper. He and his staff would find at least five patentable ideas, one or two of which could be manufactured. He told us that everyone who made a contribution would be named on the patent and would share in the royalty stream if ITW produced the product.

About six months later we were notified that there were six patent applications underway involving thirteen of the participants. Subsequently, four patents were issued, and one product went to market through ITW. Like I say, it was the only sales meeting I ever enjoyed.

                                                                                                                                                                              AS I Like IT!

In past newsletters I have offered my opinion on such southern standards as BBQ and fried chicken. Today I am going to talk about a subject near and dear to my heart and stomach – steak. There are only two qualities necessary to assure the preparation of a great steak: high quality meat and one hell of a hot place to cook it. I have eaten steak all over the U.S. and Europe, and all of the really good steaks shared these two qualities.

There are a host of really good places to get a steak. I personally think Ruth’s Chris is the best of the chain steakhouses. I’ve enjoyed a good steak at Folk’s Folly in Memphis and Peter Lugar’s and Smith & Wollensky’s in New York. I once had an outstanding steak in a very small French village cooked in a huge open fireplace. I do not hesitate to eat a steak at the Crescent City in New Orleans, The Como Steakhouse in Como, Mississippi or The Hunter’s Pub in the middle of nowhere Georgia. All of these establishments offer a really fine steak.

I was introduced to the best steak I have ever eaten over 60 years ago in an old wooden store in a run-down neighborhood in Greenville, Mississippi called Doe’s Eat Place. We lived in Cleveland, Mississippi, about 40 miles north, and my Dad loved steak. We would drive over to Doe’s a least once a month. My first trip was in 1951 when I was 12 years old. I have been back every chance I get. When I lived in Memphis, which is 160 miles away, I would make the 320 mile round trip for dinner. No kidding, leave at 4pm and get back after midnight.

What is it about Doe’s that would engender that sort of loyalty? I’ll try to explain it. As I mentioned, Doe’s is located in a pretty rough neighborhood. Rough enough to require an armed guard to escort the guest in and out. There is no parking available other than street side, and on a busy night, i.e., almost any night, you may have to park a block or so away. To the first-time visitor this can be a little intimidating. Once you’ve conquered parking, the next hurdle you will face is Doe’s itself. The restaurant is housed in a small, squat clapboard building that had been a corner grocery prior to 1941. There is a very small ground level covered porch with the obligatory wooden benches flanking the front door. The entire building might be 1,500 square feet. It is painted white and has a simple sign that proclaims Doe’s Eat Place. The exterior does not suggest confidence.

You enter Doe’s through the two-room kitchen. The first is dedicated to cooking the steaks, as the entire left hand wall is devoted to a huge gas fired oven that has been measured at over 1,000 °F. I say over because the heat gauge stopped at 1,000 °F. You will see one of the owners, probably Little Doe Signa, working the oven. This room also houses the hand cranked hot tamale machine and meat coolers. As you walk across the sagging wooden floor, you soon discover there is not a right angle in the whole joint.

The second room is dedicated to a work table for preparation of the Doe’s salads, a large hooded gas cooking area for the french fries, a small table that serves as the hostess stand and about a dozen cooks, Signa relatives, waitresses and food preparers. All are milling about in an area the size of your average walk-in closet. Oh, by the way, there are a couple of four top tables for guest in there as well. It is a bright, friendly room that smells like the kitchens of heaven. There are three additional rooms crammed with oil cloth tables and mismatched wooden chairs. You may be directed to a long table with another party; just say hello and get over it. Once you are seated the magic begins.

Doe’s does not have a menu. The prices are based on the current cost of U.S. Prime beef. Most of the guest come in knowing exactly what they want to order and don’t care what it is going cost. I’ll say right here, I have found the prices at Doe’s to be uniformly fair for the product supplied, however, I don’t recommend Doe’s if you are on a strict budget. If you are a first time guest, just ask questions and you will receive cheerful and helpful assistance. This is a steakhouse. I have heard they will also serve shrimp, but I have never witnessed this first hand. It’s like Sean Connery asking the assailant with a knife, “Why’d you bring a knife to a gunfight?” This was just before he shot him. Why would you order shrimp in a steakhouse? Moving right along.

I am going to share how I do it at Doe’s. First I order a Diet Coke. They also have iced tea, beer and water. You can bring anything else from Wild Turkey to a 1947 Mouton Rothschild. They don’t give a hoot and will provide a glass and some ice. They have Diet Coke, not Diet Pepsi. Pepsi is still considered a drink for effete Yankees in some parts of Mississippi.

The next thing I order is a dozen hot tamales and a Doe’s salad. The hot tamales are made on the premises by hand. They are wrapped in paper rather than corn husk. The Mississippi Health Department (Yes, Virginia, Mississippi does indeed have a health department) decided about 30 years ago that Doe’s could no longer use the imported husk because of the insects and little critters that came in with the husks. No amount of arguing could convince them that cooking the tamale killed the varmints, so it’s been paper ever since. I always felt the critters added a little flavor, but what do I know. This is the only evidence that the Health Department has ever come around Doe’s. The tamales have cores of well spiced finely ground meat encased in a tube of masa de harina mixed with lard or shortening and boiled in a paper wrap. Be sure and ask your waitress for a little of the tamale cooking juice to come with your order. Add a couple of dashes of Tabasco to the cooking sauce and enjoy.

Let’s spend a moment on the Doe’s salad. Because I called it the “Doe’s salad” you might think they offered other salads, they don’t. The salad is simple. Iceberg lettuce, onions and tomatoes tossed in oil, garlic, lemon juice and salt and pepper. I have watched the lady that has been making salads at Doe’s since forever. I see what she does, but I have never been able to exactly duplicate it. It is my favorite salad and I usually order two servings; one with my hot tamales and one with my steak. This brings us to the steaks.

From 1941 until Big Doe’s retirement in 1974, they offered three steaks. All were porterhouses: a small weighing about 32 oz., a medium at about 48 oz. and a large coming in nearly 64 oz. You could have them cooked to your pleasure. That was it. In recent years they have offered a large, maybe 24 oz., bone-in rib eye and a filet ranging somewhere between 12 to 16 oz. The latter, done as an accommodation for the ladies, Yankees and fainthearted men. When I was much younger, I would order the medium and never need a doggie bag. Today I generally order the small and need the bag. The steaks come out of the kitchen having just left the 1,000 °F ovens. They are cooked to perfection. If you ordered medium rare, the steak will be medium rare throughout. How they do it without timing or meat thermometers is a mystery to me. The sizzling steak will be sitting is a pool of its cooking juices and accompanied by the best hand-cut french fries you will ever encounter. Forget the baked potatoes, there aren’t any. The steak itself is absolute perfection. Every bite is pure bliss and you will end up eating more than you thought you could. I promise you this will be the best piece of meat you have ever eaten.

I always top off my meal from Doe’s extensive dessert menu. I will have one of the Blue Bell Ice Cream novelties that are the sole offering. The little bit of ice cream tops off the meal perfectly. The only trepidation that I ever have about Doe’s is that they may close before I die.