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.