For 2,500 years smart armies have known: “A great general is unfathomable,
his actions having formlessness.” Translation: a great general keeps his enemy guessing.
A great CEO moves in the same way because the competition wants to prevent him or
her from reaching their goal. And reaching intelligent goals is where increases
in equity holder value are found (the point of the exercise). But most market share
needs to be “taken” just like ground in the battlefield. And taking ground is expensive
in countless ways—and even more so if the enemy (your competition) is waiting for
you which, if they’re good, may be the case.
So the great general (CEO) thinks ahead. Keeps his battle plans
vague. Keeps the enemy (the competition) guessing. This allows the great general
(CEO) to show up where he isn’t expected and that’s beautiful competitive technique.
That's great corpcraft. And isn't that what we want when we hold equity in a company?
Sure.
So why are some criticizing corporate leaders for not publicly
disclosing their plans?
Last week the Financial Times (which we hugely admire), published
a story with ratings of the annual reports and websites of 50 major companies in
the U.S. and Europe. They listed the five “Best” and the five “Worst” companies
via a multivariate model (the study was done by Shelly Taylor Associates). The companies
were rated on a variety of parameters that heavily weighed how much information
they disclosed to readers/viewers. What we found questionable was a major downgrade
was bestowed if a chairman didn’t discuss, in relative detail, his or her upcoming
plans. The more detail the better.
As sharp-end, equity holder oriented competitors, we think that’s
a bit shortsighted.
Berkshire Hathaway was given the lowest possible rating, the
bottom of the list (50th out of 50!) because Warren Buffett didn’t exactly rhapsodize
about his future plans. Hey, we trust Warren to do right by equity holder value.
I don’t want to know the details—because we don’t want the competition to know any
more than they already do. We want Buffett to act like the great CEO (general) he
is—be vague, be formless, keep the competition (enemy) off guard, in the smoke and
wasting resources, all while our CEO skillfully swings around in the induced fog
of competition and increases the value of
the company.
Think about it…
