You really have to live through this stuff in order to appreciate the insights on the link above. If you ever found yourself wondering how the heck such poor decisions could be made in an organization, or how such disastrous results came about on something you were involved with, this link will be an awakening.
Archive for March, 2008
Read about it:
What is it that got this guy to change his mind? It seems like he finally realized the truth.
“The trouble with our liberal friends is not that they’re ignorant: It’s just that they know so much that isn’t so.” -Ronald Reagan
More golden nuggets from Philip Fisher:
By this time, I had learned enough to know that, no matter how attractive, such matters [great business opportunities] by themselves were not sufficient to assure great success. The quality of the people involved in a company was just as critical. I use the word quality to encompass two quite different characteristics. One of these is business ability. Business ability can be further broken down into two very different types of skills. One of these is handling the day-to-day tasks of business with above-average efficiency. In the day-to-day tasks I include a hundred and one matters, varying all the way from constantly seeking and finding better ways to produce more efficiently to watching receivables with sufficient closeness. In other words, operating skill implies above-average handling of many things that have to do with the near term operation of the business.
However, in the business world, top-notch managerial ability also calls for another skill that is quite different. This is the ability to look ahead and make long-range plans that will produce significant future growth for the business without at the same time running financial risks that may invite disaster. Many companies contain managements that are very good at one or the other of these skills. However, for real success, both are necessary.
Business ability is only one of the two “people” traits that I believe is absolutely essential for a truly worthwhile investment. The other falls under the general term of integrity and ecompasses both the honesty and the personal decency of those who are running a company.
Like the previous passage, it sounds like common sense. But, if it is common sense, then why is it so difficult to find in practice? Why aren’t more companies trying to ensure they have good operations, good strategy and highly trusted people?
This can apply to any organization. Look at sports. Are these qualities not present in many organizations that achieve long-term success? Which of these qualities are lacking in the not-so-successful franchises? There’s usually at least one. Sometimes it’s operations, sometimes it’s strategy and sometimes it’s integrity and sometimes its a combination.
For anyone looking for a good investment or management book, I highly recommend Philip Fisher’s Common Stocks and Uncommon Profits and Other Writings.
Events at my work of late have sparked memories of a book I read awhile ago. The next few posts are from Common Stocks and Uncommon Profits and Other Writings by Philip Fisher. Phil was an investment savant and father of Kenneth Fisher, who’s the most unconventional and interesting investment guy that I read. I read him because he makes me money.
This passage from Conservatives Investors Sleep Well section of the book (p. 188):
Here is an indication of the heart of the second dimension of a truly conservative investment: a corporate chief executive dedicated to long-range growth who has surrounded himself with and delegated considerable authority to an extremely competent team in charge of the various divisions and functions of the company. These people must be engaged not in an endless internal struggle for power but instead should be working together toward clearly outlined corporate goals. One of these goals, which is absolutely essential if an investment is to be a truly successful one, is that top management take the time to identify and train qualified and motivated juniors to succeed senior management whenever a replacement is necessary. In turn, at each level down through the chain of command, detailed attention should be paid to whether those at this level are doing the same thing for those one level below them.
Seems almost too obvious, huh? But, years in the business world have me made realize how rare such an arrangement truly is. You’d have almost as much luck re-creating the band U2.
First, many CEOs are insecure. They simply won’t hire competent people. Then they may have to compete to keep their position. So, they hire people they can control and since they aren’t competent, they can’t delegate considerable authority, not that they would anyway. Then, who has time training the juniors in firm? When you have a bunch of incompetent micromanagers running the place, you’ll always be busy responding to the latest crisis.
This an excellent checklist of management to feel out if your are an investment analyst or if you are interviewing for a job. If management doesn’t meet this model, it’s just a matter of when things will start to go really wrong.