List of businesses that can be run by idiots

[Graham Osborn]

I don't think there is any business that CAN be run by idiots however there are businesses currently/have been run by idiots.  This is a useless thread as I highly doubt you understand the inner workings of any company.

 

+1.  Buffett's view while attractive is hard to build a consistent case for.  In particular, a high-margin low-capital business like KO or See's or DVA is just so darn tempting to lever up.  So I would say that a great CEO can't make a great business out of one with unfavorable economics, but a poor CEO can definitely screw up a business with great economics.  Then you need a new CEO (and new investors) to come in and clean up :).  As an owner, Buffett controls all the capital allocation decisions, hence you don't see rabid empire-building.

[rb]

I don't think there is any business that CAN be run by idiots however there are businesses currently/have been run by idiots.  This is a useless thread as I highly doubt you understand the inner workings of any company.

 

+1.  Buffett's view while attractive is hard to build a consistent case for.  In particular, a high-margin low-capital business like KO or See's or DVA is just so darn tempting to lever up.  So I would say that a great CEO can't make a great business out of one with unfavorable economics, but a poor CEO can definitely screw up a business with great economics.  Then you need a new CEO (and new investors) to come in and clean up :)

For sure that even a great business will no do as well under a poor CEO as it would under a good one. The difference is that a great business can be put back on track when a new CEO comes in to clean up the mess. For a mediocre business a poor CEO is a life threatening event.

[Graham Osborn]

I don't think there is any business that CAN be run by idiots however there are businesses currently/have been run by idiots.  This is a useless thread as I highly doubt you understand the inner workings of any company.

 

+1.  Buffett's view while attractive is hard to build a consistent case for.  In particular, a high-margin low-capital business like KO or See's or DVA is just so darn tempting to lever up.  So I would say that a great CEO can't make a great business out of one with unfavorable economics, but a poor CEO can definitely screw up a business with great economics.  Then you need a new CEO (and new investors) to come in and clean up :)

For sure that even a great business will no do as well under a poor CEO as it would under a good one. The difference is that a great business can be put back on track when a new CEO comes in to clean up the mess. For a mediocre business a poor CEO is a life threatening event.

 

Either way, unless your holding period is "forever" and/ or you're buying whole businesses to turn them around, you're probably still going to lose money on the investment.  But yes - if you buy a great franchise after the mismanagement phase has runs its course and have a compelling case for a turnaround, go for it.

[rb]

I disagree. Take the original "ham sandwich company" - Coke. Coke has been run by Roberto Goizueta who was a fantastic CEO. After Goizueta passed away Coke has been run by a series of ham sandwiches. Starting with ham sandwich extraordinaire - Doug Ivester. Nevertheless Coke shareholders has still done quite well. I believe they would have done better if they had better leadership.

 

On way Coke shareholders did poorly is by buying it in the late 90s, early 00s. But then if you buy pay 70x EPS it's not really the CEO's fault.