Good Cop, Bad Cop

The good cop/bad cop routine takes advantage of human behavior. Take one uncooperative suspect. Take two cops. One says mean things and acts aggressively. The other says reassuring things and acts sympathetic: "I believe you." "You were in the wrong place, I get it." etc. The difficult suspect will become more likely to cooperate with the "good cop." It's a tactic formalized in the mid-20th century, but probably used much, much longer.

In the 2014 flick, The Lego Movie, Liam Neeson played the bad cop. Annnnnd he played the good cop. His Lego character would just swivel its head around to make the change.

Having a second face is an advantage of being a Lego figure. But rather than being an effective interrogator, Bad Cop dominated Lego Liam's behavior. Good Cop struggled with its duality, suffered uncertainty and was slightly awkward.

Two-faced

Sometimes bad happens in business too. A lot of companies run bad businesses. Some of those run good businesses too. Sometimes the bad businesses dominate the narrative.

Powerfleet runs a bad business. Its product lineup built some devices that didn't catch on. Its wireless rental car gadget never went beyond its launch partner, AVIS. Powerfleet didn't make much money on these but still had to support the cars. In other adventures, Powerfleet faced high customer churn. It had to replace customers just to stand still. Overall, telematics device sales are lumpy and tied to conditions beyond the company's influence.

Powerfleet's run-down the bad business to less than 2% of its activity. That 2% is coming right off the topline. It makes growth look worse than it otherwise would. Early failures occupy a bigger share of investors' minds than they do out in Powerfleet's actual business.

What's Powerfleet building in its place?

Powerfleet's gone to great lengths to construct something better. It acquired Movingdots in 2023. It bought MixTelematics in 2024. It bought Fleet Complete in 2025. These enhanced Powerfleet's engineering, services and distribution. Each of the acquisitions moved it towards a solution provider and further away from a gadget shop.

Today, Powerfleet runs a good business. It's put together an AI platform, Unity, that can take in data from Powerfleet's devices and any other device. It then tells customers what to do with that. Unity tells customers like Walmart and XPO Logistics when a tire needs replacing and shows them what they can change to make their tires last longer. Longer lasting tires mean lower costs to customers. Fewer tires, brakes, less gas, fewer accidents, more efficient routes, loading sequencing, warehousing — all this means more dollars for customers. Powerfleet sells safety and savings.

It means more dollars for Powerfleet too. Back in 2022, Powerfleet's bad business made up 42% of the company. It ran 25-30% margins on this. Its AI platform hadn't hit all the marks yet. Its "services" made up the rest. Now products just make up just 24% of the activity. The bigger and faster growing solutions business runs close to 60% margins.

So, everyone’s on board, right?

Bad memories

Lamplighter uses the Good Company/Bad Company framework often. Like Lego Liam in the movie, the "bad business" often takes over investor attention. This has happened to Powerfleet. To be fair, it's shifting its entire business model — so it has to replace a lot of existing business in order for it to grow. This type of thing takes time and lots can go wrong. But so far, it’s hit all the marks.

Powerfleet's been winding down the lagging pieces of its operation. It's doubled-down on turning into a solutions business — improving safety and knocking down customers' expenses. Investors valued Powerfleet more highly when it was a crummy product business. Burned by that experience, they haven't yet come around to the idea that Management has actually found something that works. The gap between investors hanging onto that bad experience and what management’s built offers the opportunity for an attractive investment.

Disclaimer: None of this is investment advice. It's meant to illustrate ways LCM thinks about investing. Things that LCM decides are good investments for LCM and its clients are based on many criteria, not all of which are covered here. Some or all of LCM's ideas may not be suitable for other investors. LCM does not recommend investing either long or short any position mentioned. LCM may own positions in some of the companies mentioned. Some of its ideas will lose money — investing entails risk. See full disclaimer here.