Why
Owning Companies with Visionary CEO’s Should be a Mandatory Part of Your
Investment Strategy
By Anthony
Rhodes
Once
upon a time, there was a company known as Blockbuster. This company was the
undisputed ruler of the vast kingdom of Videoland. On a daily basis, the
inhabitants of Videoland would travel from far and wide to visit Blockbuster,
and pay financial homage to its sovereign right to provide them with videos.
Now, every now and then, other companies would rise to challenge Blockbuster,
but with its vast network of fiefdoms spread throughout the kingdom, they could
never amass enough traction to pose it any serious threat. Blockbuster would
charge outrageous fees to the inhabitants if they kept their videos beyond the
agreed upon time period, and during the period prior to dvd’s, would even
charge them if they failed to rewind their videos before returning them! The people
would grumble from time to time about these fees, but upon realizing that they
had very few choices to consider, would simply comply with its mandates and
continue to travel to Blockbuster for all their video needs.
One
day, a man named Reed arrived in Videoland. He began to analyze these fees that
Blockbuster was imposing on the inhabitants, and saw an opportunity to offer a significant
alternative. Reed realized that he would not be able to compete with
Blockbuster in the same way that the other companies tried to do, but would
instead use the Internet to place his videos, and then charge the inhabitants a
small monthly fee to view all the
videos that they wanted, for as long a period as they so desired. This new approach
was both welcomed and accepted by the populance, and within a few short years,
the tyrannical regime of Blockbuster came to an end, and in celebration of their
liberation, the residents of Videoland changed its name to what is now known as…Netflix.
The
moral of our story? Investing in companies with visionary CEO’s is a crucial component to having a successful
portfolio. And conversely, doing so with those without one, can contribute
quite handsomely to its downfall. Blockbuster’s CEO’s blockbuster failure to
acknowledge the changing technological landscape, will forever place him as a primary
case study of what can happen, when you allow the dominance of your position to
blur your companies’ vision. It also serves as a staunch reminder to all those corporations
out there, who fail to adhere to the lessons of the past, and continue focusing
their attention on the ways in which things have always been, instead of looking
forward, and envisioning what they actually could be.
Visions of Success (and Failure)
When
the Dow Jones Industrial Average was first comprised in 1896, it included the
names of 12 stocks, out of which only one still remains in its original form: General Electric. The difference between General Electric and U.S. Leather’s of the early Dow, is that the
survivor’s leadership team was able to look beyond the horizon and diversify itself for the future, while the others remained committed to their original
monopolistic business models of the past. The legacy of former G.E. executives
like Thomas Edison or Jack Welch, is that they guided their companies with an eye
to the future, and never allowed their current or past successes to mar that perception.
The result of this vision, was that the investors who purchased shares of General
Electric during their tenure enjoyed consistently reliable growth for their
portfolios, and those who instead invested in those now defunct corporations, suffered
an all too different reality.
The
ability to break with convention and chart a new path is a unique talent to
possess, especially in the conservative blue-blooded culture of corporate
America. Most CEO’s are content to follow in the ways of the past, and to steer
free of innovative ideas or directions, which is why the demise of Blockbuster
is but one of many similar tales which can be told within our corporate history.
This is why visionary leaders are so rare, and possess such an outstanding
performance record throughout their tenure. This is also why companies which
hire them should be considered as a long-term holding within your portfolio.
While others remain wary to “rock the boat” with dismissals of thoughts of
ground breaking possibilities, the visionaries are prone to embrace the challenge of change, and
investors have consistently been rewarded by their willingness to do so.
(Anthony
Rhodes is the President and owner of wealth management firm
The Planning Perspective www.theplanningperspective.com)
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