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.