PHIL TOWN

M is for Management

One of the toughest jobs we have as investors is to choose a good management team to invest in.  Picking the jockey can be as important as picking the horse. 

A Rule #1 investor does it with passionate, honest, self-effacing - people who are committed to the business over themselves. Think Steve Jobs at Apple.  Well, except for the self-effacing part.  So think the CEOs running virtually all of Buffett's private companies.  They are all rich, but they keep working hard because they love their businesses. 

A great example of a bad example is Rick Wagoner at GM.  I've never met Rick.  He played b-ball at Duke.  Who knows, maybe I'd like him.  Maybe he had issues at GM that no one could fix.  I don't know. 

What I do know is he failed the shareholders on a scale rarely seen in history.  And it's not like he's new to the business: He was appointed the Chief Financial Officer in 1992. He's been at or near the top of the business now for 17 years. GM's problems must be laid at his feet.  But why has it taken all these years to fire him?  Didn't GM have a board of directors?

Apple Excerpt from Phil Town's PAYBACK TIME

In answer to the Apple valuation questions, an excerpt from my new book, PAYBACK TIME:

Leadership is about vision and values. All public businesses have management. Fewer have leadership.

As I’m writing this, Steve Jobs is stepping down from Apple for health reasons. I’ve worked with Steve and can tell you from personal experience that he can be a total son-of-a-bitch about what he thinks is right. He’s like Simon on “American Idol.” He has absolutely no concern for your personal feelings. What you are doing is either “cool” or “bullshit”. But it’s that laser-like focus on what he sees as “cool” that allows his company to connect technology with consumers better than any company in the world.

I pray Steve recovers quickly. America needs every hard-core, iconoclastic, SOB like Steve Jobs it can get. If Steve doesn’t make it back to work, it’s an open question whether anyone else can keep Apple’s products at the cutting edge of brilliant innovation. Last time Steve stepped down, the company was turned over to a sugar-water salesman and Apple nearly went down the tubes. When Steve was brought back, he saved the company. We’ll see if a real leader can step up to keep it saved now.

(To that end, you also need to be careful about buying into a company that’s so reliant on the brains of a single person. If that asset goes away, the entire business as an asset can go away, too.) Also be certain to not invest in businesses that have political climbers at the helm. They are not leaders. They are the polar opposite. They look to where the band wants to go and then get in front of it and wave their baton. The world has enough self-aggrandizing band-standers in politics. Be careful of investing with one.

Now go play.

Phil Town

Related Posts from the Phil Town Archives:

• What About Apple?  (2007)
• Phil Town Archives:  Posts filed under Management

Rule #1 Question of the Week: What About Apple?

This week's question for Phil Town comes from Dave, about Apple (AAPL):

Dear Phil Town,

A coworker recommended your Payback Time book to me as a smart way to get into the market.  I must say I agree with her, the book as fantastic and I've learned a lot about how things work out there. That being said, I've started analyzing some companies and one in particular has me stumped. The company in question is Apple. As for the 4 Ms, Apple has meaning for me (I own several of their products and I work in the tech industry), has a moat based primarily on Brand, has exceptional management (Steve Jobs), and appears to have a good MOS.

Here are the numbers I've gathered to this point (straight from MSN):

NTRI's Moat

Some of you wanted to know if I'm in (or have been in) NTRI. Here's the comment I left on the blog a little earlier today:

I'm not an owner of NTRI, gang. I don't know the diet business well enough to make a call on the moat. I have students who are trading this thing and have just killed it so I used this as an example in the talk I do to show how important the arrows are, even if you think you have a wonderful business at a great price. And it really is a great example.