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jerryking : capital_allocation   6

When Charlie Munger Calls, Listen and Learn
Jan. 25, 2019 | WSJ | By Jason Zweig.

Mr. Munger was calling to say that he had read the novel Mr. Taylor was about to self-publish, “The Rebel Allocator.” He was “surprisingly engaged,” recalls Mr. Taylor, 37, who had sent the book to Mr. Munger without much hope the great investor would read it. Mr. Munger proceeded to reel off roughly 20 minutes of unsolicited, detailed advice, mostly about plot and character.

In an interview, Mr. Munger tells me he tends to “skim” or “at least give some cursory attention” to any book that mentions Berkshire Hathaway......“The Rebel Allocator” is the opposite of most business novels. Here, the rich capitalist isn’t an evil genius using genetic engineering to hijack the brains of newborn babies. Instead, he is a hero: an investing mastermind who regards allocating capital as a noble calling that improves other people’s lives.

In the novel, a business student named Nick is on a field trip with his MBA class when he meets a 77-year-old billionaire, Francis Xavier, a restaurant mogul also known as “the Rebel Allocator” and “the Wizard of Wichita.”

Blunt and bristly, with zero tolerance for stupidity, Mr. Xavier spouts proverbs and zingers. A mash-up of Mr. Munger and Mr. Buffett, he often invokes their ideas.

Taking a shine to Nick, Mr. Xavier asks him to write his biography. Like many young people today, Nick wonders if becoming a billionaire is inherently immoral when poverty is still widespread.

Mr. Xavier teaches Nick what separates great businesses from good and bad ones. He uses three drinking straws, labeled “cost,” “price” and “value,” to demonstrate: When a business can charge a higher price than its goods or services cost, the difference is profit. When the value its customers feel they get is greater than price, that difference is brand or pricing power—the ability to raise prices without losing customers.

As Mr. Xavier moves the straws around, Nick learns that investing decisions can make the world a better place: “Good capital allocation means doing more with less to create happier customers,” says Mr. Xavier. “Profit should be celebrated as a signal that an entrepreneur provided value while consuming the least amount of resources to do so.”
asset_management  Berkshire_Hathaway  books  capital_allocation  Charlie_Munger  fiction  intrinsic_value  investing  investors  Jason_Zweig  novels  Warren_Buffett 
january 2019 by jerryking
Merck C.E.O. Ken Frazier on Death Row Cases and the Corporate Soul - The New York Times
By David Gelles

March 9, 2018

How do you prioritize your time?

There are three things that the C.E.O. should be focused on. Number one is that sense of purpose and direction that the company needs, making sure that that’s always clear and people know what we’re all about. The second thing is capital allocation. We only have so many resources. Making sure that you’re putting those resources where you have the greatest opportunity. And the third, which I think by far is the most important, is to make sure that you have the right people in the most important jobs inside the company.
African-Americans  capital_allocation  CEOs  death_row  Kenneth_Frazier  HLS  lawyers  Merck  new_graduates  pharmaceutical_industry  priorities  purpose  resource_allocation  talent_acquisition  think_threes  the_right_people 
march 2018 by jerryking
The Economy Needs Amazons, but It Mostly Has GEs
the country as a whole badly needs some rules-defying risk-taking. For business, that means a bit more Amazon in the boardroom and a bit less GE....The purchase of Whole Foods by Amazon introduced a level of volatility and turmoil (at least singularly to the retail sector) which had been absent from the market for a long time....The rest of the market remained placid. And months of historically low volatility has begun to look like dangerous complacency....... another, potentially more troubling explanation: stagnation. Muted markets may be an inevitable product of steady, sluggish growth, low and predictable interest rates, declining business startups and failures, and decreased competition. In other words, the problem is, there aren’t enough Amazons disrupting the stock market and the economy.....Jeffrey Bezos founded Amazon in 1994, he has prioritized expansion and innovation ahead of profit. In its early years, free cash flow—cash from operations minus CAPEX—hovered around zero. Mr. Bezos approaches new products like a VC. Many will flop (like the Fire smartphone), but some will be home runs (e.g. AWS). Amazon launched Prime, which offers free delivery in exchange for an annual fee, in 2005. John Blackledge, notes Amazon has repeatedly innovated in ways that make Prime even more valuable to subscribers.......Amazon is now profitable, yet cash retention remains secondary to building great products and delighting and retaining customers.

....If Amazon is one extreme in how companies invest, General ElectricCo. is the other. It has long been fastidious about capital and cash deployment......CEO Jack Welch perfected this approach in the 1990s.. it continued under Jeffrey Immelt. Last week, Mr. Immelt said he would retire, after 16 years struggling to restore growth. In part, that reflected how financial engineering had inflated profits under Mr. Welch. Yet Mr. Immelt ’s investment decisions too often chased the conventional wisdom on Wall Street and in Washington. ...........growth is hard for any company that dominates its markets as much as GE does. GE’s size also attracts debilitating political scrutiny. ....In response to new regulations and pressure from Wall Street, Mr. Immelt largely dismantled the business...........Investors still want GE to return cash to shareholders, and it has obliged,.....while good for shareholders in the short run, this is no recipe for growth in the long run. GE’s cash flow is shrinking despite the company’s focus on preserving it, while Amazon’s is growing despite that company’s readiness to spend it.......North American boardrooms desparately needs some rules-defying risk-taking. For business, that means a bit more Amazon in the boardroom and a bit less GE

[ See John Authers article which references Vix]

The "Minsky Moment" occurs when investors realize that they have paid far too much for the credits that have bought, no buyers can be found, and the system collapses. Aka Wile E. Coyote running-off-a-cliff....The greatest dangers to us are not from things we perceive to be high-risk, because we generally treat them carefully. Trouble arises from that which we perceive to be low-risk.
digital_economy  Amazon  GE  Amazon_Prime  risk-taking  volatility  Greg_Ip  stagnation  cash_flows  long-term  growth  start_ups  complacency  instability  conventional_wisdom  Jeffrey_Immelt  Jack_Welch  conglomerates  delighting_customers  capital_allocation  Jeff_Bezos  financial_engineering  rule_breaking 
june 2017 by jerryking
Network orchestrators are the new path to profit - The Globe and Mail
Jul. 03, 2016 | Special to The Globe and Mail | HARVEY SCHACHTER

* "The Network Imperative" by authors Barry Libert, Megan Beck, and Jerry Wind.

Technology - Shift from physical to digital. Develop a digitally enabled platform around which people can congregate.

Assets - Shift from tangible to intangible assets. Physical assets are becoming a liability. Pay attention to your brand, a key intangible asset, and also view people as an asset, not an expense.

Strategy -move from operator to allocator. As a strategist, Mr. Libert has spent many years working with leaders to figure out what products to sell to what market. But these days, leaders should be active allocators of capital, like portfolio managers.

Leadership - The shift here is from commander – in charge of a highly structured, hierarchical, top-down organization – to co-creator, who knows how to motivate, inspire and work alongside others to develop the network.

Boards - His favourite shift, because it is the most difficult, is the switch from governance to representation.
Finally, the mindset must change to thinking less rigidly about roles, processes, products and industries.
assets  atoms_&_bits  books  business_models  capital_allocation  co-creation  eBay  Etsy  flexibility  Harvey_Schachter  intangibles  mindsets  networks  orchestration  pay_attention  platforms  portfolio_management  physical_assets  resource_allocation 
july 2016 by jerryking
Yes, the Wealthy Can Be Deserving
FEB. 15, 2014 | NYT | By N. GREGORY MANKIW.

Actors, authors, and athletes do not make up the entire ranks of the rich. Most top earners make their fortunes in ways that are less transparent to the public.... the most natural explanation of high C.E.O. pay is that the value of a good C.E.O. is extraordinarily high.

That is hardly a surprise. A typical chief executive is overseeing billions of dollars of shareholder wealth as well as thousands of employees. The value of making the right decisions is tremendous. Just consider the role of Steve Jobs in the rise of Apple and its path-breaking products....A similar case is the finance industry, where many hefty compensation packages can be found. There is no doubt that this sector plays a crucial economic role. Those who work in banking, venture capital and other financial firms are in charge of allocating the economy’s investment resources. They decide, in a decentralized and competitive way, which companies and industries will shrink and which will grow. It makes sense that a nation would allocate many of its most talented and thus highly compensated individuals to the task.
high_net_worth  income_distribution  winner-take-all  the_one_percent  CEOs  compensation  private_equity  income_inequality  talent  breakthroughs  Steve_Jobs  finance  capital_allocation  decision_making 
february 2014 by jerryking
Letters - How to Build a Successful CEO -
May 20, 2009 | NYT |

Successful chief executives combine four abilities:

¶The ability to allocate cash flow for growth. Without growth, little else matters.

¶The ability to pick the right managers for the operating jobs. C.E.O. “vision” is largely realized through the people in the critical posts.

¶The ability to inspire the troops. Charisma comes in many colors; getting others to be excited about the mission is one of them.

¶The ability to be aware of and understand all the moving parts. Chief executives don’t need in-depth knowledge of every discipline — accounting, marketing, sales, benefits, taxes and so on — but they need to know enough about each one to ask the right questions.

None of these four are easy, and in combination, they are very hard to find.
letters_to_the_editor  CEOs  howto  ksfs  fingerspitzengefühl  contextual_intelligence  growth  hiring  executive_management  charisma  cash_flows  capital_allocation  hard_to_find  asking_the_right_questions  talent_acquisition  the_right_people 
may 2009 by jerryking

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