I’m really loving getting older. That reality hit me this week when the first “Rational Alternative” column appeared in the Financial Mail. My better half said she loved the photo the FM had used. Personally, fewer lines and some more hair would have been preferable. But those come with aging. And when you really think about it, who would trade age’s other benefits for a prettier face?
Surprising as long-time colleagues and friends may find it, earlier in my career I occasionally worried about how subjects of my writing would interpret the piece. There’s a bit of the people-pleaser in all of us, especially our younger versions. I clearly recall wondering whether some of the words should be toned down, some of the embarrassing stuff left out. For better or worse, that’s no longer part of the thought process. I think for better.
This piece, my debut for the new-look FM, falls into that category. Anglo American’s new CEO Mark Cutifani is the kind of warm, friendly person fellow humans instinctively warm towards. His likeability has translated into a universally positive perspective of his abilities. Executives in his sector happily refer to him as SA’s “best miner”. I have no idea how one earns that title. But I what I do know is down at the rock-face, they would have guffawed at his performance at the recent Lekgotla. And investors, rational as they must be, must be concerned that the man looking after their money “broke down in tears” in front of the worse possible audience. This column appears first in the FM and is republished Saturdays, with permission, on Biznewz. – AH
By Alec Hogg*
Nassim Taleb’s Fooled by Randomness proves that in life it’s better to be lucky than smart. But as luck is random, it’s no factor to try work into Business Plans.
The key priority for running a company, rather, is rationality. Although rational beings don’t always make the right calls, odds of doing so are much higher than those cursed by swings of emotion.
Benjamin Graham explained this brilliantly in his classic book The Intelligent Investor. He introduces us to “Mr Market”, a fictional manic depressive. One day sunshine personified, he would be prepared to pay anything for a stock. Next day he is depressed so sells at any price.
Graham used “Mr Market” to explain the volatility of shares. His analogy can stretch to corporate leadership. A fact we were reminded of through separate examples last week.
The positive side came via another splendid set of financial results from Bidvest, the conglomerate so ably run by its founder Brian Joffe. For my money, he’s the greatest living South African entrepreneur. And when it comes to his business dealings, this trained chartered accountant is among the most rational human beings you’ll ever meet.
On the flip side, I was appalled to read Business Day’s report of how Anglo American CEO and Chamber of Mines President Mark Cutifani “broke down in tears” at the start of his closing address to the 2013 Mining Lekgotla.
OK, so the event was hardly a ball of fun. Having spent two full days there, I was delighted to leave. It felt like being punched in the stomach. Cutifani will have absorbed the gloom at a much higher intensity.
The Lekgotla’s dark cloud stemmed from the absence of trade union AMCU. The ghost of this mushrooming new kid on the block was everywhere. Spreading fear of chaos to come. The prospect of revisiting Marikana.
AMCU’s posturing for a 150% wage increase is clearly outrageous. But on other issues it seems to be acting quite rationally.
Positioning itself as apolitical makes sense. Antagonism towards the ruling party is strongest in the rural areas. In those communities the lack of service delivery is the number one issue. AMCU’s rival, NUM, is the ANC’s partner. So it’s the bedfellow of those under hottest fire. Little wonder members are deserting.
Equally rational was AMCU’s Lekgotla boycott. Had it attended, the new union would have given legitimacy to an event which, lest we forget, was co-hosted by NUM.
That said, any rational being would have realised AMCU’s no-show was obvious. And been prepared for it. Rather than wishing for the miracle which would never come.
Don’t get me wrong. Crying in public is not necessarily a weakness. The most masculine of us shed during weddings, funerals and sad movies.
But that’s very different to letting the waterworks flow in a public forum. Especially when addressing an audience of trade unionists, politicians, competitors, the odd foreign investor and, of course, the media.
The master of rational thought, Berkshire Hathaway’s chairman Warren Buffett, says a board of directors has only two duties. First is to find the right CEO. And then ensure he or she serves the company’s shareholders.
Capital is cowardly. Nobody invests in a company because it is more socially responsible than the next. Money has always bought the whisky. Especially in public companies.
CEOs are paid to generate the highest possible return for shareholders. Period. Achieving this requires rational decision-making. That means suppressing emotional swings. Steering clear of the narrative. Focusing on the numbers.
Joffe has this off pat.
From the day he created Bidvest 25 years ago, every manager has been measured by a single criteria – Return On Funds Employed, hence the internal credo of ROFE for JOFFE.
All who work at Bidvest know capital is scarce. If they want their boss to send more their way, they must first do the numbers. Ensure the anticipated return meets overall group targets. Everything else is secondary.
It’s business in its purest form. Rational, focused, unemotional. The way capitalism works best. Creating wealth, creating employment. And the way it will keep working until the world discovers a superior alternative. Or investors stop being investors. And become donors.
* Alec Hogg is the publisher of biznewz.biz. This column appears first in the Financial Mail, SA’s leading weekly business magazine which is available on Thursdays.
