How should we evaluate money managers and business leaders? Or for that matter, a presidential candidate?
One way is ask these three key questions:
- Have they developed a well-defined strategy?
- Do they have the gravitas to consistently make tough decisions?
- Are they highly effective communicators?
If we look at all three – money managers, business leaders and presidential candidates – there are some compelling similarities and noteworthy differences.
The Great Money Manager
When we analyze the standout money manager, we typically see a coherent and careful strategy. That strategy may or may not be complicated, but it is always well-defined.
Equally as important, the great money manager doesn't materially deviate from their strategy. That requires a steely ability to make difficult decisions. For example, if a manager sells while the herd is charging after the market, courage is necessary to weather the inevitable second-guessing that will follow.
A great investor must be willing to make the difficult or contrarian call because their investment discipline dictates it. If the investor abandons that discipline, it’s easy to lose focus and conviction. Without that, they become under-performing roadkill.
As for communication, the great money managers know it is almost as important as the strategy itself, particularly in times of crisis. The best managers never hide when the sky is falling. At a minimum, a meltdown is an opportunity to remind everyone of their strategy. At best, the world-class money managers recognize that communication is an ongoing opportunity to educate the marketplace and ultimately expand their influence and/or client base.
For an investor, the fundamentals of an investment strategy shouldn't change regularly. For the business leader, it may be just the opposite. Marketplace forces demand rapid and regular adjustments.
As a result, decision-making is doubly difficult. The business leader needs to: 1) Make hiring and firing decisions to continually source the talent to meet their evolving business needs, and 2) Have the fortitude to modify the product or service whenever necessary (Apple Maps).
It’s a constant threat – innovate or die – but there’s no choice. Just look at all of the companies the world has passed by or are in the process of being passed by: Gateway, Yahoo, Kodak, Blackberry, Best Buy, among others.
When it comes to communication, the business leader needs to be an unabashed marketer. Unlike the renowned investor, who may deliberately take a lower key approach, the business leader must be the most ardent and articulate champion of the brand. Would you buy a product or work for a CEO that wasn't willing to extol its virtues to everyone?
Which leads us to presidential candidates. We’re days away from an historic election.
As we go to the polls, shouldn't we hold the candidates to the same standards: What is their clear strategy? Can they make the gut-wrenching decisions to advance the country? Can they move public opinion to get something done for the common good?
These are all important questions to ask when deciding - do my money managers, the companies providing me with valuable products and services or my presidential candidate measure up?