Money talks, part 1

My great friend Rob Simons (who secured the Invest-notes URL and set-up the site as a birthday gift) arranged for me to join him for both a day with entrepreneurs from around the world gathering in Omaha, as well as the Berkshire Hathaway Annual Meeting. Must be something in Nebraska’s water, because there certainly seems to be a lot of really smart business people and investors who hail from there. It was a terrific, thought-provoking couple of days. Thank you, Rob.

Friday started with a visit to the new (2-weeks old) TD Ameritrade Park, home of select NCAA finals for the next 28-years. We enjoyed – in the true sense of the word – presentations from Duayne Acklie, chairman of Crete Trucking, and Mike McCarthy, founder of McCarthy Capital. I offer up what struck me as their most interesting observations. Though it is likely best summed up by a comment from a guy sitting behind me, “Listening to life lessons from two billionaire’s in one morning. What a great way to start a day.”

Mr. Acklie is a business man of the old school, and his stories of buying, building and running a variety of ventures – predominantly in transportation, but including banks, electronics, etc – spoke to the rewards of working hard and taking calculated risk. He set the tone for the day by talking about the importance of people to an enterprise. From his employee profit sharing program (10% of net), to the satellite links that allow the company to let drivers know about any family problems while on the road (and opportunity to rectify them), to a refusal to lay-off any employee or cut any paychecks through the 2008-2009 recession, Mr. Acklie walks the talk of “people are our most valuable asset.” An entertaining speaker, the “Buffett Sideshow” comment was his.

In a completely different vein, Mike McCarthy, a self-described former hippie with a degree in Medieval Literature, talked about running an extremely successful venture capital company. He commented that his impression of the character of the people running the companies he chooses to invest in is far more important than financial information. I liked his idea that companies should hire people based on where they want to be, not where they are now. “Don’t hire who you need, hire who you want.” It’s more expensive, but pays big dividends as you grow a business.

Asked a good question about strategy and tactics, Mr. McCarthy replied, “Tactics perfectly executed but without strategy will always result in failure.” He said the first question is always, “Are you trying to make a difference, or just trying to make money?” If an enterprise is not mission-driven, it is unlikely to succeed grandly. This is because a business strategy is necessary, but doesn’t guarantee success since it always comes down to management’s commitment to the enterprise. Ultimately, the biggest challenge for a business is being able to clearly answer the question, “What do you do?” Lack of clarity will usually lead to failure.

How to grow a successful business, as the owner or as an investor partner, comes down to the people. Makes sense to me. What kind of stake do the people running companies you have in your portfolio have in the companies that employ them?

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2 Responses to Money talks, part 1

  1. Jimmy Peet says:

    Thanks for sharing your experience Chris. Sounds like it was an awesome experience. I jotted down some notes, will take the thoughts to bed with me tonight and start again fresh tomorrow. I particularly liked the last part about continuing to learn. It seems that is what I enjoy most about being alive.

  2. Scot Barenblat says:

    I am a bit jealous of your trip to Nebraska. I don’t keep a list of things to do before I go, but that would be one. For now I will have to settle for reading the annual report.

    I tend to agree with your friend McCarthy about the importance of management – I always tell clients that capital is invested in people, not plans. But once you have met the minimum threshold of honesty and integrity, I believe this is more important in privately-held companies than public ones because they are generally more sensitive to management shortcomings. At the very largest corporations, I have found that management skill is least important. Short of fraudulence and greed (eg. Enron, WorldCom, Tyco) they seem to rumble along under their own momentum, unchallenged primarily due to their sheer size, despite obvious waste and managerial weakness. The largest corporations are more vulnerable to competitors with disruptive technology (such as Amazon or Google) than competitors with truly exceptional management (such as Apple).

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