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There was no good way to answer a simple question:

So I built a solution.

I basically turned the CFO group chat into a live benchmarking tool, but with +1,000 members who've shared their relevant revenue and employee ranges + current tools they use across every finance category.

As a small boy, I dreamed of making a YouTube documentary on history’s most controversial non gaap financial metric: EBITDA.

While I may never win the Nobel peace prize or walk on the moon, I’m cool if this is my lasting legacy.

Our Creative Dictator Ben + Stevey Stoves + I went to the well and pulled together the following deep dive into the origins and impact of EBITDA. Kind of like a Bill Simmons 30 for 30 but on financial and business type stuff. We plan to do more. So hopefully you like it.

For those of you who would prefer to read rather than watch, I’ve included the full write up below. Enjoy.

Famed investor Charlie Munger calls it bull shit earnings. Cable cowboy John Malone calls it capital structure neutrality… Private Equity firms call it adjusted.

The metric we are talking about is EBITDA

And love it or hate it, this measurement shapes how people think about the type of business they want to run, and how much it’s worth. 

How did a metric invented out of desperation become the de facto industry standard for profits in VC and PE backed companies?

A wise man once said.

I’m here to explore all of these, in a cfo explains the history of EBITDA.

Let’s go!

Here’s where the story begins. In the late 1970s John Malone, an ex McKinsey consultant, finds himself running a regional cable company out of Utah called TCI. The guy is 32, a really smart dude and total brainiac, but a bit over his head in a new industry. Now,  For all you chord cutters and streamers, who are probably watching this on YouTube right now, cable is a very “stuff” heavy business. Before satellites you needed to physically connect regions via wait for it… cables, both above and below ground. And homes needed the requisite hardware to receive signals. There was a lot of infrastructure, which you had to finance up front, and maintain it over time so it didn’t break.  

On one hand, this business sucked because it required a massive cash outlay to finance all the rigging. But on the other hand it rocked because it was basically a monopoly, with limited players in each region, and you received predictable monthly subscription payments from customers.

To say the industry was debt heavy would be an understatement. In the early days, TCI couldn’t afford to pay down the principal on the piles of loans it serviced. Anything left after paying interest was plowed back into the company’s operations. They were nearly always on the brink of breaching their covenants. 

I hate when the banks do that.

There’s a funny story where the banks threatened to raise the interest rates on the loans TCI had outstanding, and knowing it would bankrupt the company, Malone called their bluff, threw his keys to the building on the conference room table, and said, if you do that, it’s yours to run. The next morning the keys were still on the table and the interest rates were the same. 

As a result, TCI rarely produced earnings, or net income, the official accounting measure of profitability that Wall Street gauged success upon. And not many people cared for the stock, as banks refused to cover it. They boasted little sell side industry coverage, as banks treated the whole cable industry like a Scarlett letter. 

As detailed in the book Cable Cowboys by Mark Robichauix, it was around this time that Malone started to espouse a concept little used by wall street analysts in corporate valuations. The true value of cash flow, defined as operating earnings before interest, depreciation, and taxes. Or EBITDA.

Malone went on a tour de force over the next few years. 

He argued that after tax earnings simply didn’t count. What was important was cable’s predictable and strong cash flow, which funded TCI’s continued expansion.

He even went so far as to say that net income was an invention of accountants. ‘

So this guy took on a fifty plus year old, federally mandated accounting system. 

Think about it, he’d tell a young analyst. Because TCI had high interest payments and big write offs on cable equipment, it produced losses. And because it produced losses, it paid hardly any taxes to the government.

As long as cable operators collected predictable monopoly rent from customers, net interest payments, and grew from acquisitions, why worry?

The guy was firmly anti profits. 

Malone changed how investors defined profit, and in the process, he opened doors to capital for the cell tower business, dot com companies and the AI chip companies of today. 

But first, let’s go a bit deeper on the mechanics of EBITDA, at least through the lens of Malone.

As detailed in the book The Outsiders, by William Thorndike:

It basically put the cash generating capacity of a company into a vacuum, into a universe where how much debt you took on, how much infrastructure you had that got old and turned into a non cash expense as it rotted, and where your business was based out of for tax purposes didn’t matter. 

We’ve spoken about debt a lot but to get more specific the debt was used to buy physical stuff which you could argue was getting old and turn that into what we call a non cash expense on the P&L. The cable industry’s Achilles heel was always its heavy network investments. Now it could use that to its advantage to create a phantom expense that would get rid of profits and therefore taxes. 

In other words:

To link it back to share price, which Malone obviously wanted to go up,

As one observer put it:

And Malone’s playbook made sure he didn’t do much of the latter.

Malone’s EBITDA evangelism didn’t just stay in telecom; it spread like wildfire through the world of leveraged finance. Hell, it helped to create it. 

Private equity firms were the first true disciples. They needed a way to evaluate acquisitions that could carry lots of debt, but still throw off enough cash to service it. EBITDA became the north star; it showed the potential before debt payments came knocking. The bigger the EBITDA, the bigger the debt package you could stomach.

Investment bankers followed suit. Bankers needed a common denominator to value companies quickly across industries. EBITDA made comparisons easier, faster, and more headline-friendly. “10x EBITDA” became a shorthand for dealmakers everywhere, regardless of what was actually going on below the line.

Then came the twist.

Software companies, despite their low capital intensity and minimal physical assets, adopted EBITDA as a badge of sophistication. Even if you weren’t laying cable or buying trucks, you could still flex your EBITDA margin on an earnings call. The logic? SaaS companies wanted to play in the same capital markets sandbox, and needed to speak the same language.

Suddenly, a metric born out of capital-heavy infrastructure projects was powering investor decks for cloud-native companies slinging APIs and freemium models.

Why? Because EBITDA, flawed as it may be, gives you something that’s comparable, presentable, and—most importantly—adjustable.

You can adjust out anything these days. 

Some use “adjusted EBITDA” and throw in, to use a blanket term, “management add-backs” (these could be layoffs due to over hiring, marketing schemes that bombed, global expansions that failed). It can quickly become a get-out-of-jail-free card.

You can grow EBITDA while making terrible long-term choices. Like over-levering to hit a short-term multiple. Or outsourcing core infrastructure to cut costs. Or failing to invest in R&D. Or writing terrible loans. (Adjusted) EBITDA gives no red flags for that.

As a bonus, here are some of the craziest EBITDA Adjustments I’ve Heard of

And now, like any great 2000s duo, it’s making a comeback.

AI companies are reawakening the original spirit of EBITDA. These aren’t lightweight software businesses running lean… they’re back to big, chunky infrastructure spending. Racks of GPUs. Custom silicon. Private data centers with enough wattage to light a small city.

It’s capital-intensive. It’s hardware-heavy. It’s the spiritual sequel to cable, just with more H100s and fewer coaxial lines.

And here’s where it gets wild: some AI startups are now borrowing against their chips—literally using GPUs as collateral—to fund operations. That’s not metaphorical. That’s debt-financed compute, with EBITDA holding the narrative together.

According to The Information, Companies have used their high-powered chips to get more than $20 billion in loans.

Why the return? Because EBITDA, once again, helps these businesses tell a story that separates the engine’s output from the fuel it takes to run it. It makes aggressive spending feel more palatable to investors hungry for scale—and more forgiving of net losses buried under piles of silicon.

In many ways, the AI boom is the closest we’ve come to cable-era Malone economics in a generation: huge upfront investment, deferred monetization, and the hope that infrastructure at scale will lead to dominance.

Malone created a monster.

He also made a lot of people, including himself, very very rich.

If you were wondering, Malone sold TCI for 48 billion in the late 1990s. 

There is a big difference between creating wealth and reporting income malone liked to say

So it begs the question - what actually matters? 

As Munger’s partner in crime, Warren Buffet was famous of saying,

Funny enough, if you were to ask Munger and Buffet what made them most angry about EBITDA it was the treatment of depreciation. Buffet called it negative float - you paid for assets up front, before you ever get any use or value out of them. It’s the worst type of expense there is. If you paid all your employees up front for five years and then marked down a non cash expense in years two through four, you still paid them. In that sense, depreciation is as a real of an expense as you can get .So how can you ignore it?

As such, it seems we’ve come back to a world where free cash flow matters the most. And EBITA, while close, is not exactly the same thing. You can’t adjust cash flow. It is what it is. 

EBITDA is in many ways like democracy, the least worst system of measurement between industries and capital structures. It’s the most portable metric in a very imperfect toolkit. It’s also in many ways an idiot test. 

Is there some shady stuff in there? Of course. A few companies are burying recurring legal bills below the line or adjusting earnings because the oranges did not grow in Florida. But if everyone is juicing their metrics in different ways, the only fair comparison is to create an equally juiced up field. EBITDA and even adjusted EBITDA introduce the least penalization across the board, which is what keeps comparability intact.

It is the Mark McGwire era. If everyone is taking steroids, at least the playing field is level.

And if we stop trying to adjudicate purity, it can be kinda fun to see who can hit the ball the furthest.

If it’s all bullshit, everyone may as well just be bullshitters.

Long live EBITDA.

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TL;DR: Medan Multiples are DOWN week over week.

The overall tech median is 3.2x (DOWN 0.4x w/w).

What Great Looks Like - Top 10 Medians:

Wishing you credible EBITDA adjustments,

CJ